The US Contractor Test Is Shifting Again — Where DOL’s 2026 Proposals Leave Remote Hiring

The Federal Contractor Test Is Moving Again

Worker classification under US federal law is on the move for the third time in five years. In 2026 the Department of Labor proposed two rules that, together, would reshape how businesses tell an employee from an independent contractor and when two companies count as "joint employers." The Wage and Hour Division published a proposed Independent Contractor rule on 27 February 2026 (DOL) and a separate proposed Joint Employer rule on 22 April 2026 (DOL).

Before anyone re-papers their contractor agreements, the single most important fact is this: both are proposals, and as of mid-2026 neither is the law. The 2024 rule still governs. This piece explains what is being proposed, why the standard keeps swinging, what is genuinely settled versus still up in the air, and how a US-focused remote-hiring or staffing operation should read it.

It updates the US portion of the broader Remote Hiring Compliance 2026 overview, and the classification question it turns on is the same one the misclassification risk tool on this site is built around.

A Pendulum, Not a Straight Line

The reason this feels like déjà vu is that it is. The federal test for independent-contractor status under the Fair Labor Standards Act has swung with each administration.

• 2021 rule — an employer-friendlier "economic reality" test that gave controlling weight to two core factors: the nature and degree of control over the work, and the worker’s opportunity for profit or loss.
• 2024 rule — a worker-friendlier test that dropped the "core factors" idea and weighed six factors as a totality of the circumstances, with no single factor decisive. This is the rule in effect today.
• 2026 proposal — a return toward the 2021 framework, restoring the two-core-factor economic-reality analysis (with modifications), and proposing to apply the same approach under the FMLA and MSPA.

The practical effect of the pendulum is uncertainty: a classification that is defensible under one rule can look shakier under the next. That is why the durable answer is to classify on the underlying facts of the relationship — control and economic dependence — rather than to chase whichever rule is ascendant (Jackson Lewis).

The Joint-Employer Piece — and Why Staffing Chains Should Care

The second proposal is less discussed but arguably more consequential for anyone who hires through agencies, subcontractors, or affiliated entities. The Joint Employer rule sets standards for when two businesses are jointly responsible as employers of the same worker, splitting the analysis into two situations.

• Vertical joint employment — where one entity (say, a client) engages workers who are directly employed by another (say, a staffing agency), and the question is whether the client is also their employer.
• Horizontal joint employment — where related or associated employers jointly control the same worker.

For staffing firms, Employer-of-Record providers, and any company that runs contracted-labor chains, the joint-employer standard determines exposure to wage-and-hour liability for workers they do not directly employ. A clearer, more employer-favorable standard would reduce that exposure — but until the rule is final, the current framework applies.

What Is Actually Settled Right Now

This is where careful reading matters, because "the DOL proposed a new rule" is easy to mishear as "the rule changed." It did not.

Neither proposal is final. The Independent Contractor comment period closed on 28 April 2026 and the Joint Employer comment period on 22 June 2026; the DOL is now reviewing comments, with a final independent-contractor rule expected later in the year. The 2024 rule remains operative in the meantime — it still governs private FLSA litigation over contractor status, even though the DOL has signaled it will not enforce it (Jackson Lewis).

Two further distinctions keep companies out of trouble. First, this is the Department of Labor acting under the FLSA — it is separate from a joint-employer rule the National Labor Relations Board issued under the National Labor Relations Act, which is a different agency, a different statute, and a different test. Do not conflate them. Second, federal law is a floor, not the whole picture: state tests are independent and often stricter.

State Law Still Governs — and It’s Often Tougher

A federal rule change, even once final, does not touch state classification law. The clearest example is California’s "ABC" test, under which a worker is presumed an employee unless the hiring entity proves all three of a demanding set of conditions — a far harder standard to meet than the federal economic-reality test in any of its versions. Several other states apply ABC-style tests of their own.

The consequence is concrete: a business could be comfortably compliant under a restored federal 2021-style test and still be misclassifying workers under California or another ABC-test state. Federal classification is necessary but not sufficient, and the state where the worker actually sits can be the binding constraint.

What to Do About It

1. Don’t reclassify on a proposal. The 2024 rule governs today; wait for a final rule before changing how you treat workers under federal law.
2. Classify on the facts. Control over the work and the worker’s economic dependence drive the analysis under every version of the federal test — get those right and you are more robust to whichever rule wins.
3. Map your state exposure. Identify which states your contractors actually work in and apply the stricter of federal and state law; assume ABC-test states are the binding constraint where they apply.
4. Watch the joint-employer angle if you use staffing or EOR chains. The vertical/horizontal analysis speaks directly to agency-client and affiliated-entity liability.
5. Keep federal agencies straight. The DOL/FLSA rules are separate from NLRB/NLRA and from IRS tax classification — a change in one does not move the others.

The Bottom Line

The DOL’s 2026 proposals would swing the federal independent-contractor test back toward the employer-friendlier 2021 framework and reset the joint-employer standard for staffing chains — but both are still proposals, and the 2024 rule remains the law until a final rule lands. The signal is clear on direction and unsettled on timing, so the sound response is to classify on the real facts of each relationship, apply the stricter of federal and state law (ABC-test states especially), and avoid the two classic errors: reclassifying on the strength of a proposal, and conflating the DOL’s wage-and-hour rules with the NLRB’s labor-law rules or the IRS’s tax test. The pendulum will keep swinging; well-documented, fact-based classifications survive the swings.

RemoteStaffingWiki is an educational resource operated by LegelpTech Outsourcing Pvt Ltd, and is editorially independent. This article is general information, not legal advice. If you need a managed shortlist of remote staff, you can compare Zedtreeo as one provider option.