May 18, 2026

U.S. Department of Labor Proposes New Rule on Independent Contractors

By Leona Hansen

The U.S. Department of Labor (“DOL”) has proposed a new rule defining independent contractors for purposes of federal wage and hour law. If finalized, the rule would make it easier under federal law for employers to classify workers as independent contractors. Employers should note, however, that state laws, including more restrictive ones such as New Jersey’s “ABC” test, would remain unchanged.

Under the proposed rule, the DOL emphasizes two “core” factors: (1) the nature and degree of the employer’s control over the work, and (2) the worker’s opportunity for profit or loss based on managerial skill. Other factors will be considered only if these core factors do not point toward the same classification.

The proposed rule was open for public comment through April 28, 2026, and, if finalized, would serve as guidance for courts applying federal law.

Importantly, the proposed rule would not override state law standards, many of which are more restrictive.

In New York, courts generally weigh multiple factors to determine whether a worker is free from supervision, direction and control in the performance of their duties, thereby qualifying as an independent contractor. In addition, certain industries, such as construction, are subject to distinct statutory tests.

New Jersey applies the “ABC test,” under which workers are presumed to be employees unless the employer can establish each prong of the state’s three-part test.

Proper classification remains critical, and employers should ensure their practices can withstand scrutiny under both federal and applicable state laws.

If you have questions about worker classification or how differing federal and state standards apply to your workforce, please contact any Book Law attorney or Leona Hansen at lhansen@booklawllp.com.