I once visited a client who proudly showed me his production line. He pointed to two workers sitting next to each other on a production line and said, “that one is an employee, the one next to him is an independent contractor. They do the same thing, but I enjoy the flexibility.”

No. No. For the love of God—no.

Misuse of independent contractor status runs rampant in the U.S. workforce today. Strict legal rules apply as to when someone may qualify as an independent contractor, and the default will always be employee status.

Making the situation even more complex, the various states, and our federal government all weigh in with their own criteria for independent contractor status, and the rules do change.

Understanding the Latest DOL Classification Proposal

On February 26, 2026, the United States Department of Labor issued a Notice of Proposed Rulemaking (91 FR 9932) proposing to rescind its 2024 independent contractor rule and replace it with a streamlined analysis grounded in federal case law. The proposal would apply a traditional “economic reality” test under the Fair Labor Standards Act (FLSA)—and extend that framework to the Family Medical Leave Act (FMLA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA) —focusing on whether a worker is economically dependent on a business or in business for themselves.

The analysis emphasizes two core factors. The first of these consists of control over the work. To what extent do we find the worker operated autonomously and not directed by the company? Constant observation and correction on an assembly line would not qualify.

The second core factor: opportunity for profit or loss. If we see a business framework, with bills submitted and payment received, and the worker absorbing expenses for tools, equipment, and supplies, we see that opportunity. It also shows a risk of loss. Again, no such perils present on an assembly line.

Additional non-core considerations also play a role with the new test. These constitute skill, permanence of the relationship, and whether the work is part of an integrated production process.

What Else Determines Independent Contractor Status?

How does this break down? The more skill involved, the more chance that independent contractor status may exist. However, the less permanence, as in duration of work over time, the more likely we find an independent contractor. And finally, the less integration with the ordinary operation of the business, the more likely the individual stands as an independent contractor.

The regulations also seek to clarify and reemphasize that actual working conditions—not contractual labels—govern classification. In other words, calling someone an independent contractor, having them agree that they are an independent contractor, and even signing a written agreement stating that they are an independent contractor will not carry the day, if the factors discussed fail to support that status.

Recent Litigation Highlights Ongoing Classification Risks

Meanwhile, the issue continues to be litigated in court. In Galarza v. One Call Claims, LLC, 156 F.4th 1156 (11th Cir. Oct. 2025), the Eleventh Circuit held that a jury could reasonably find workers constituted employees—not independent contractors—under the FLSA based on the economic reality of the relationship. There, the Court of Appeals applied its established six‑factor “economic reality” test, emphasizing that worker classification turns on the totality of the circumstances and whether the workers are economically dependent on the alleged employer, rather than on contractual labels. Applying those factors, the court concluded that most weighed in favor of employee status—including the employer’s control over schedules and tasks, the workers’ lack of opportunity for profit or loss, the permanence of the relationship, and the integral nature of the work—and therefore reversed the district court’s grant of summary judgment in favor of the employer. The Court of Appeals so ruled despite the fact that all plaintiffs had signed written agreements confirming their independent contractor status.

Bottom line: new regulations or new court decisions aside, this area of law remains a horrific trap for the uninformed employer, with massive downside consequences. It remains a complex world. Be advised!

If you have questions, please contact David J. Carr or another member of the Workplace Solutions Group.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.