Employee Or Independent Contractor? The Department Of Labor Is Getting Ready To Change The Definition Again

Here we go again! The Trump Administration’s Department of Labor (DOL) has proposed a new Independent Contractor Rule. The comment period on the proposed Rule is open until April 28, 2026. This move by the DOL was expected particularly after last year’s Field Assistance Bulletin directed DOL field staff to discontinue use of the 2024 Biden Administration’s DOL Rule (which made it notably more difficult to prove an independent contractor relationship) when evaluating whether an independent contractor (IC) relationship exists, and to instead use the IC analysis that dated all the way back to the DOL’s July 2008 IC Rule.

The new proposed Rule provides that Economic Dependence is the ultimate factor for the independent contractor inquiry. In other words, an individual is an independent contractor, if, as a matter of economic reality, they are in business for themselves.

So how is Economic Dependence determined? Put simply, under the proposed Rule an IC either has their own business, or they don’t. Here are factors to consider under the proposed Rule that will guide that assessment:

• The nature and degree of control over the work. The proposed Rule does not require complete autonomy for the IC, and allows a company to require an IC to fulfill certain legal obligations, including meeting health, quality and safety standards, and to impose agreed-upon deadlines and quality standards, all without damaging the IC status.
• The individual’s opportunity for profit or loss. The proposed Rule sees this factor as fundamental to being in business for oneself, but is more lenient than the current Rule about what qualifies as having this “opportunity.”
• The degree of permanence of the working relationship. The key under the proposed Rule is to keep the IC relationship sporadic or intermittent. The more “permanent” the relationship becomes, the greater the chance that an employment relationship has been formed.
• The amount of skill required for the work. The proposed Rule seeks to determine if the IC has a special skillset that the average employee does not have, and so the IC is filling that skill gap and not just replacing personnel that would otherwise be employed.
• The IC’s work is not part of an integrated unit of production. In other words, you can’t hire extra IC widget makers when what you do is make widgets.

The proposed Rule provides some examples of these factors in action (and yes, we changed the names and factual scenarios a bit):

1. Example: Tammy is the owner/operator of a tractor-trailer and provides transportation services for Lonie’s Logistics. Lonnie’s requires Tammy to comply with all federally mandated transportation safety rules, especially requiring drug and alcohol testing. Lonnie’s requires Tammy to meet delivery deadlines. She gets incentives to deliver early and is penalized for being late.
   Answer: Tammy is an IC.
2. Example: Ralph is a highly skilled roofing specialist. He works nearly full-time for Charlie’s Construction. Charlie provides him with no training. He is an outside salesperson telling potential customers that thanks to his roofing skills their roof project is guaranteed to be fabulous.
   Answer: Ralph is an IC. He brings his own skills to the Company and does not rely on Charlie’s to provide training. The proposed Rule would find that these factors weigh in favor of Ralph being an IC. In this example, the fact that Charlie gives the IC no training is crucial.
3. Example: Ned Nickerson is an IC freelance editor for Nancy’s News, a weekly newspaper. Ned works remotely and does things like assigning and reviewing articles published by the newspaper. He’s also known to write an occasional article, or if an article is a train wreck, he “revises” it. Since Ned was the editor of the River Heights Highschool newspaper, he also does newspaper layout. Nancy’s News has some full-time editors who do some of the same things. These people are employees, Ned is not. He wants to be free to do what he wants when he wants. Plus, he has high hopes he and Nancy will get back together, get married and go for a part-owner family member type exemption.
   Answer. Even under the proposed Rule, Ned is an employee. Whether he and Nancy get back together remains to be seen.

At the end of the day, at this point all we have is the DOL’s proposed Rule. But, chances are that when the public comment period closes, and the rule-making process is completed, something very close to the above factors will be adopted as the final Rule (and by “final” we mean until a future administration changes it yet again). Best practices in the meantime: apply the totality of the facts and the above factors to your proposed business relationship; have a well drafted written contract in place with the IC and don’t forget to have the IC provide up to date workers’ compensation and general liability insurance for themselves and any sub-contractors.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.