By Bruce M. Luchansky, Esq.
Introduction
Employers in Maryland and Washington, D.C. face increasing complexity when it comes to classifying workers.
A new proposed rule from the U.S. Department of Labor (DOL) aims to bring more clarity—and potentially shift how businesses approach this critical issue.
What Changed?
On February 26, 2026, the DOL’s Wage and Hour Division issued a Notice of Proposed Rulemaking (NPRM) addressing worker classification under the Fair Labor Standards Act (FLSA).
If finalized, the rule would:
- Rescind the 2024 classification rule
- Reintroduce a framework similar to the 2021 approach
- Align more closely with federal court precedent
The goal is simple: make it easier to distinguish between employees and independent contractors.
Why Classification Matters
The distinction is critical.
- Employees are entitled to protections like minimum wage and overtime
- Independent contractors are not
Misclassification can lead to significant legal and financial risk.
The “Economic Reality” Test
The proposed rule centers on the economic reality test, which asks:
👉 Is the worker economically dependent on the employer, or truly operating an independent business?
To answer that question, the DOL emphasizes two core factors:
1. Control
The degree to which the employer controls how the work is performed.
2. Opportunity for Profit or Loss
Whether the worker can increase earnings through initiative, investment, or business decisions.
These two factors carry the most weight in the analysis.
Additional Factors
If the core factors are not decisive, other considerations come into play:
- The level of skill required
- The permanence of the relationship
- Whether the work is integral to the business
Importantly, the rule emphasizes real-world practice over written contracts.
What actually happens in the working relationship matters more than what is stated on paper.
Broader Impact
The proposed rule would not only affect the FLSA.
It would also apply to:
- Family and Medical Leave Act (FMLA)
- Migrant and Seasonal Agricultural Worker Protection Act (MSPA)
This means classification decisions could have wider legal implications across multiple laws.
Why This Matters for Employers
This proposed rule is generally viewed as more favorable to employers.
The 2024 rule used a broader “totality of the circumstances” approach with multiple equally weighted factors.
The new proposal:
- Prioritizes two core factors
- Provides more predictability and consistency
- Aligns with how courts have historically interpreted classification
As a result, employers may have a stronger position when classifying workers as independent contractors.
Industries Most Affected
This change could significantly impact industries that rely heavily on independent contractors, including:
- Construction
- Transportation
- Gig economy platforms
- Agriculture
- Professional services
For these sectors, the rule may simplify compliance—but risks still remain.
Final Takeaway
The rule is not yet final and may change based on public input.
However, one thing is clear:
👉 Worker classification remains a high-risk, high-impact decision.
Employers should stay proactive, review current classifications, and ensure they align with evolving legal standards.
How Luchansky Law Can Help
If your company relies on independent contractors, proper classification is critical to avoiding costly legal exposure.
Luchansky Law helps businesses navigate classification issues under the FLSA, FMLA, and Maryland law.
- 📞 410.522.1020
- 📧 lucky@luchanskylaw.com
