Labor Department Proposes Rule to Clarify Employee Versus Contractor Status for Restaurants

The U.S. Department of Labor published a Notice of Proposed Rulemaking on Feb. 26, 2026 that would rescind its 2024 independent-contractor rule and replace it with a streamlined analysis the agency says is backed by federal judicial precedent and will apply to the Fair Labor Standards Act, the Family and Medical Leave Act, and the Migrant and Seasonal Agricultural Worker Protection Act. The DOL filed the proposal under RIN 1235-AA46 and said, “The Department is proposing to rescind a 2024 rule on that topic which it is no longer applying in its investigations and replace it with a streamlined analysis, backed by federal judicial precedent, that will provide greater clarity and predictability to workers and employers alike as to their proper classification.”

Legal advisers who reviewed the NPRM characterize the change as a return to a practice-based economic-realities approach. JD Supra and Seyfarth say the proposed rule largely mirrors the DOL’s 2021 rule, while Armstrong Teasdale frames the action as reversing the Biden administration’s 2024 rule. Armstrong Teasdale writes, “Another big-picture change in the proposed rule is the focus on the actual practices of the working relationship. The proposed rule dictates that what actually happens in the working relationship is more relevant to an analysis of independent contractor versus employee status, as opposed to the 2024 final rule, which places more weight on what level of employer control may be theoretically possible under the circumstances.”

Seyfarth’s legal update highlights how the NPRM would constrain the universe of supplemental considerations: the Proposed Rule provides that “additional factors” other than these five may be relevant but “only if the factors in some way indicate whether the individual is in business for him- or herself, as opposed to being economically dependent on the potential employer for work.” Seyfarth also notes the NPRM includes illustrative examples intended to provide predictability and to clarify how the economic-dependence test should be applied in specific circumstances.

The rulemaking opens an immediate 60-day window for input. Littler’s advisory, authored by Alex T. MacDonald, Dimitrios T. Markos, Robert Pritchard, and Jim Paretti, notes that “The DOL will accept public comments beginning Friday, February 27, 2026. … The comment process will be open for 60 days, closing on April 28, 2026. Interested employers should work with counsel to decide whether and how to weigh in. In the meantime, employers should continue to be guided by existing precedents.” Littler’s memo counsels employers to evaluate whether to submit formal comments and to follow current court decisions while the rulemaking proceeds.

Advisory firms have begun telling clients to audit classifications. Armstrong Teasdale explicitly recommends employers “again consider auditing their independent contractor classifications,” and other advisories say the NPRM is intended to guide courts, companies, and workers by reducing grey areas. The DOL’s Wage and Hour Division lists contact information for the agency in its notice, including an office address at 200 Constitution Ave NW, Washington, DC 20210, and a toll-free line at 1-866-4-US-WAGE (1-866-487-9243); the notice and NPRM text are posted on the Department’s website under RIN 1235-AA46.

The coming weeks will determine whether the federal test shifts back toward the 2021-style economic-reality framework that emphasizes whether a worker is “in business for him- or herself” or economically dependent on a single employer. Employers and legal advisers now face a defined April 28, 2026 deadline to shape the rule that could set enforcement and litigation parameters for years to come.