Independent Contractor Classification: The Next Inning — DOL’s Proposed Rule is Ready for Comments

In our previous post, we covered the DOL’s independent contractor classification changeup. The Wage and Hour Division issued guidance in May 2025 that the 2024 Rule would be traded for the more flexible “economic realities” framework from the 2008 Fact Sheet. At the time, we noted that a proposed rule was on-deck and now it’s in the batter’s box.

The Proposed Rule

The proposed rule was published in the Federal Register on February 27, 2026. The DOL encourages all interested parties to submit comments on the proposed rule, which has a 60-day comment period closing on April 28, 2026.

As anticipated, the rule proposes to overturn the 2024 Rule and sub in analysis the DOL published in its January 7, 2021 final rule — with a few modifications.

Here’s the highlight reel from the Proposed Rule:

·      Applies an “economic reality” test to determine whether a worker is an independent contractor in business for themselves, or an employee economically dependent on an employer.

·      Centers on two core factors: (1) the degree of control over the work, and (2) the worker’s opportunity for profit or loss.

·      Considers additional factors: skill required, permanence of the working relationship, and whether the work is integral to the employer’s business.

·      Emphasizes that contracts alone don’t determine classification.

·      Includes eight real-world examples illustrating how the factors apply in practice.

The Dual-Standard Squeeze Play Continues

Government contractors continue to face a switch-hitting compliance field. DOL investigators are applying the 2008 framework, but private plaintiffs can still argue the stricter 2024 Rule in court until the proposed rule finalizes. The 2024 Rule is still on the books for private litigation and Service Contract Act and Davis-Bacon Act compliance obligations tied to federal contracts are still in play.

Don’t Wait for the Pitch: What to Do Right Now

The temptation when a proposed rule is in OMB review is to wait and see. Don’t sit on the bench. The compliance risks we identified in our prior post haven’t left the ballpark.

• Step Up to the Plate: Leave a Comment. The public comment period is your opportunity to tell the DOL how its proposed analysis works or doesn’t work in the context of federal contracting. If your business relies on independent contractors performing on SCA or DBA-covered contracts, your operational perspective is relevant.
• Keep your eye on an audit. If you haven’t already conducted a classification review, don’t wait. Prioritize contractors performing on SCA and DBA contracts, where misclassification risk carries False Claims Act exposure.
• Dig out documentation. Regardless of which standard ultimately prevails, documentation is your best defense. Written agreements, project-based scopes of work, evidence of contractor independence, and records of tools and equipment ownership all matter. Note that even carefully drafted independent contractor agreement will not insulate a business from misclassification liability if the day-to-day reality of the relationship looks like employment. Keep your documentation lined up and error-free.

The Crowd Isn’t On Its Feet Yet

The DOL’s submission of a proposed rule to OMB is a sign that the regulatory reshaping of independent contractor classification is heading into the home stretch but we’re still in the middle innings.

The smart play is to stay in a proactive compliance stance: audit your classifications, shore up your documentation, engage in the rulemaking process, and build a compliance framework to adapt as the rules continue to evolve. Ward & Berry will continue to monitor the proposed rule’s progress through OMB review and will provide updated guidance when it is published for public comment.

If you have questions about how the evolving DOL classification landscape affects your federal contracting operations please reach out to our team to help your team.