DOL Proposes Another Independent Contractor Shift. Businesses Should Assume Litigation Is Coming.

On February 27, 2026, the U.S. Department of Labor’s Wage and Hour Division issued a Proposed Rule that may once again change how independent contractor status is determined under the Fair Labor Standards Act.

If finalized, this would be the third major shift in less than a decade.

The current standard took effect in 2024. Now the DOL is considering a return to the 2021 framework, with modifications.

The proposed return emphasizes two core factors:

1. The degree of control the worker actually exercises over the work; and
2. Whether the worker has a genuine opportunity for profit or loss.

The DOL’s stated reason is predictability. It argues that the 2024 “totality-of-the-circumstances” approach, where no factor carried predetermined weight, created uncertainty and discouraged legitimate independent contractor relationships. The agency believes a return to the 2021 “core factors” framework may reduce compliance costs and slightly increase independent contracting.

That is the policy argument.

The litigation reality is different.

This Is an Enterprise Risk Issue, Not a Technical HR Update

Independent contractor classification is no longer a drafting exercise. It is a balance sheet issue.

If misclassification is alleged, exposure can include:

• Unpaid wages and overtime
• Liquidated damages
• Attorneys’ fees
• Class or collective actions
• Parallel state claims under NY Labor Law
• Freelance Isn’t Free Act liability
• Retaliation claims
• Potential personal liability for owners and executives

If your revenue model relies on independent contractors, regulatory volatility does not reduce risk. It increases it.

Each swing in federal policy invites a new wave of audits, private litigation, and opportunistic claims.

Classification Risk Is Built Into How Your Business Operates

At Lieb at Law, P.C., we evaluate classification risk the way a litigator would, not the way a form agreement does.

We look at:

• Compensation and commission structures
• Control mechanisms in practice, not just on paper
• Use of technology for supervision or tracking
• Non-competes and restrictive covenants
• Termination authority
• Integration into core business functions
• How the model will appear to a jury

Independent contractor status is determined by economic reality. That reality is shaped by operations, not labels.

If your agreements say “independent contractor” but your workflows say “employee,” the contract will not save you.

Why Acting Now Matters

Public comment on the Proposed Rule is open through April 28, 2026. The final rule may look different. It may shift again in the next administration.

Waiting for regulatory stability is not a strategy.

The prudent move is to stress-test your model under both frameworks and determine:

• Where exposure exists today
• How a plaintiff’s lawyer would frame the case
• Whether your documentation aligns with actual practice
• Whether structural adjustments can reduce risk without breaking the business model

Independent Contractor Risk Audit

If your company engages independent contractors, now is the time to:

• Audit agreements and compensation structures
• Evaluate control and supervision practices
• Assess exposure under federal and state law
• Review notice, deduction, and payment compliance
• Align operational reality with legal positioning

Lieb at Law, P.C. represents businesses, founders, and executives in high-stakes misclassification and wage-and-hour litigation. We also conduct proactive classification audits designed to reduce litigation exposure before a claim is filed.

Regulatory instability is not a defense to misclassification. It is a reason to prepare.

To schedule a confidential strategy session, contact Lieb at Law, P.C.

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Think Disabled Employees Should be Paid AT LEAST Minimum Wage?

The Federal Department of Labor is seeking by Proposed Rulemaking to eliminate certificates that had allowed employers to pay productivity-based subminimum wages to workers with disabilities without violating the Fair Labor Standards Act. 

Think it's a good idea?

Regardless, think Trump thinks it's a good idea? 

Interesting time to make such a change given that Trump likes that cheap labor regardless that the purpose of the curtailments was altruistic in creating opportunities for employment for the disabled. 

Anyway, you can share your thoughts on or before January 17, 2025, identified by Regulatory Information Number (RIN) 1235-AA14, by either of the following methods:

• Electronic Comments: Submit comments through the Federal eRulemaking Portal at https://www.regulations.gov. Follow the instructions for submitting comments.
• Mail: Address written submissions to: Division of Regulations, Legislation, and Interpretation, Wage and Hour Division, U.S. Department of Labor, Room S-3502, 200 Constitution Avenue NW, Washington, DC 20210.

College Athletes Are Employees Due Minimum Wage

In ruling that College Athletes may be entitled to sue for unpaid compensable work and recover minimum wages, plus double damages called liquidated damages, and attorneys' fees, for the prior 2-years (3-years if violations were found to have been willful), the 3rd Circuit Court of Appeals, in Johnson v. NCAA, held "that college athletes may be employees under the FLSA when they (a) perform services for another party, (b) “necessarily and primarily for the [other party’s] benefit,” Tenn. Coal, 321 U.S. at 598, (c) under that party’s control or right of control, id., and (d) in return for “express” or “implied” compensation or “in-kind benefits,” Tony & Susan Alamo Found., 471 U.S. at 301 (quotation omitted)."

This is the biggest decision to impact college sports since the NCAA responded to the SCOTUS decision in NCAA v. Alston by allowing athletes to profit from their name, image, and likeness (NIL) with direct endorsement deals followed by the National Labor Relations Board (NLRB) taking the position that college athletes are employees for purposes of the National Labor Relations Act (NLRA) and forming unions / engaging in concerted activity. 

Yet, the biggest takeaway from Johnson v. NCAA isn't the newsworthy headline about college athletes, but instead, its analysis of what types of work must be paid, for everyone. 

Simply, the Circuit Court has instructed us that in most instances, "efforts that provide tangible benefits to identifiable institutions deserve compensation." In fact, the Circuit Court dispensed with the NCAA's nonsensical argument that the students were paid in other forms by receiving "increased discipline, a stronger work ethic, improved strategic thinking, time management, leadership, and goal setting skills, and a greater ability to work collaboratively" because those benefits "are all exactly the kinds of skills one would typically acquire in a work environment." In all, the Circuit instructed to always "look to the economic realities of the relationship," "upon the circumstances of the whole activity," when determining if a person is defined as an employee entitled to payment for work. Additionally, it is true that an employee must be promised or expect compensation for their work, but importantly, that compensation is not limited to money and can be instead, the receipt of in-kind benefits, where the promise or expectation can be implied and needn't be expressly stated / written. 

Johnson is a big win for unpaid workers everywhere in the US. 

New Overtime Time and a Half Final Rule under the Fair Labor Standards Act

Ready for a big jump in being entitled to overtime pay, which is 1.5 times pay?

The Department of Labor has set new effective earnings thresholds to be entitled to overtime pay per 29 CFR 541.  

Starting on January 1, 2025, we are moving the Fair Labor Standards Act (FLSA) from an entitlement to overtime pay for those making under $35,586 to those making under $58,656 per year ($1,128 per week). Note that this threshold does not apply to employees who are "bona fide executive, administrative, or professional capacity . . . or in the capacity of [an] outside salesman," which terms are defined at 29 CFR 541.

These numbers are particularly important because a worker who is not paid properly can recover 2X back wages (liquidated damages) on unpaid overtime from the prior 2 years. 

Att'n Employers Wage Theft is NOW Larceny in NYS

Effective 9/6/2023, employers who steal wages are guilty of larceny under Penal Law 155. 

Per the bill's, A154A, justification, "[a]ccording to Cornell University's Worker Institute, wage theft in New York accounts for nearly $1 billion in lost wages each year and affects tens of thousands of workers - that's close to $20 million per week."

Yet, employees who experience wage theft should also remember that they can bring civil claims to get that stolen money back through the New York Labor Law and Federal Fair Labor Standards Act, together with liquidated damages and more. 

That means that if your employer takes your money or doesn't pay as frequently as required or doesn't pay overtime, you have rights to sue for your Wages and Hours.