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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Circuit Court of Appeals Gives Plaintiffs a Tactical Way Out of Pre-Dispute Arbitration Clauses

In Bruce v. Adams & Reese, LLP, the 6th Circuit Court of Appeals held that a pre-dispute arbitration clause was invalid for an entire case because just one claim in the case involved sexual harassment based on a broad interpretation of the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 ("EFAA"). Specifically, EFAA 402(a) provides that "at the election of the person alleging conduct constituting a sexual harassment dispute or sexual assault dispute . . . no predispute arbitration agreement . . . shall be valid or enforceable with respect to a case which is filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute." At issue in this case was the definition of the term "case," and the Circuit Court defined that term as "encompassing a plaintiff's entire suit." Specifically, the Appellate Court held that "where a plaintiff brings multiple claims in a single suit against a party with whom she has an otherwise-valid arbitration agreement, and one of those claims alleges a 'sexual assault dispute' or a 'sexual harassment dispute,' the EFAA renders the arbitration agreement unenforceable with respect to each of the claims that comprise her case." As a result, a Plaintiff seeking to tactically avoid arbitration can plead a sexual harassment claim as well as their core claims to avoid the suit. However, an entity seeking to compel arbitration can counter, by not arguing that the other claims must still be arbitrated, but by arguing that the sexual harassment claim was not alleged under the applicable pleading standard in the first instance and nothing must be arbitrated. Nonetheless, the Appellate Court left "for another day the question of whether the Yost standard (federal pleading standard), the Diaz-Roa standard (Bell v. Hood’s jurisdictional standard), or some other standard represents the correct interpretation of the EFAA" when determining if the sexual harassment claim was properly alleged. There is going to be a lot of litigation coming on this issue because companies are not going to want to give up their pre-dispute arbitration clauses because creative Plaintiff's counsel have tactically negated arbitration obligations by loosely alleging a weak sexual harassment claim. 

Arbitration clauses are no longer bulletproof.

If your company relies on pre-dispute arbitration agreements, or you are challenging one, contact Lieb at Law, P.C. to assess your exposure and strategy now.

NYC Enacts Gender-Motivated Violence Protection Law

There is a new civil cause of action in NYC (Administrative Code of the City of New York section 10-1104) for crimes of violence motivated by gender that occurred prior to January 9, 2022. Now, any person claiming to be injured by a party who committed, directed, enabled, participated in, or conspired in the commission of a crime of violence motivated by gender may bring a civil claim against that party. This allows survivors to bring claims even if those claims would have otherwise been barred by the statute of limitations. However, the revitalization of claims is not permanent where claims brought under this law must now be commenced within 18 months of January 28, 2026. So, act immediately if this impacts you. Also, if you brought a claim between March 1, 2023 and March 1, 2025 that would satisfy the requirements of a cause of action under this section, you may now amend or refile (if dismissed) their claim to add a cause of action under this section. Finally, you can recover compensatory and punitive damages, injunctive and declaratory relief, attorney's fees and costs, and such other relief as a court may deem appropriate. 

HUD Steps Back on Disparate Impact: Why Courts, Not Agencies, Should Set the Rules

The Federal Government just made a smart move in proposing to remove HUD's discrimination effect regulations in housing (under the Fair Housing Act), which now exist at 24 CFR 100.5(b). Specifically, the notice of rulemaking in the Federal Register explains that setting standards to determine if discrimination occurred is better left to the Courts, who ruled on the issue of disparate impact discrimination and set standards in the 2015 case of Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. Therefore, as HUD puts it, as to its regulations, it has "determined they are unnecessary." Not only are they unnecessary, but have regulations on top of case law is confusing where landlords and brokers must look to varying sources to know how to behave and what is disallowed. Hopefully more regulations that establish standards to determine breaches of law will be deleted and we can go back to a less regulated world with more case holdings guiding behavior based on the specific facts at hand.

Have questions about fair housing compliance, discrimination claims, or enforcement risk? Talk to a litigation team that lives in the case law. Contact Lieb at Law, P.C. 

DEI, the False Claims Act, and the New Enforcement Reality for Employers

National Law Review article published this week highlights a significant shift in federal enforcement strategy: the U.S. Department of Justice is now actively using the False Claims Act (FCA) to scrutinize workplace DEI initiatives at companies that receive federal funds or hold government contracts.

Read the article here:
https://lnkd.in/ee_mvzCg

According to the article, DOJ is issuing civil investigative demands to major employers and treating DEI-related inquiries as potential fraud investigations, not policy disagreements. The focus is no longer limited to what a DEI policy says on paper, but how it operates in practice.

For employers and the attorneys, this represents a material change in exposure.

The FCA has traditionally been used to police false billing and fraudulent payment claims. DOJ is now advancing a novel theory: that maintaining certain DEI practices while certifying compliance with federal anti-discrimination laws can constitute a false or misleading claim for payment. This approach has been reinforced by executive orders, DOJ guidance, and public statements from senior DOJ leadership.

Whether courts ultimately endorse this theory remains to be seen. In the meantime, investigations are underway, and the cost of responding to a CID alone can be significant. Documentation, internal decision-making, and how DEI concepts are operationalized are now front and center.

This is exactly why Attorney Andrew Lieb recently served as a featured instructor for a New York State Bar Association CLE titled Risk-Informed DEI: Balancing Legal Exposure and Organizational Culture. The program was designed to address the reality employers and counsel are facing now.

The CLE focuses on practical, defensible frameworks for advising employers in this environment. That includes identifying where FCA risk may arise, understanding how regulators evaluate DEI implementation rather than labels, and developing documentation and compliance strategies that align with both legal obligations and organizational goals.

For attorneys advising employers, and for organizations that contract with or receive funding from the federal government, DEI is no longer a purely cultural initiative. It is a legal risk management issue that requires careful, informed handling.

Details on the NYSBA CLE, including registration and CLE credit information, are available here:
https://lnkd.in/eHK9FHfk

As enforcement continues to evolve, employers should not assume that rebranding or surface-level changes are sufficient. The question regulators are asking is how programs actually function, how decisions are made, and what representations are being made to the government. Getting that analysis right now can make the difference later.

NYS' Deceptive Acts and Practices Law Expanded and the AG will be Coming for Business

NYS' Deceptive Acts and Practices Law has been expanded to include "Unfair, Deceptive, or Abusive Acts and Practices" and it is now called the FAIR Act - "fostering affordability and integrity through reasonable (FAIR) business practices act" - with the changes being effective on February 17, 2026. The biggest change being that the law's, GBL 349, consumer-oriented requirement has been dropped as a requisite for the Attorney General to bring a claim, but not for private claims. Under the amended law, a business' act is now also violated for being "unfair" and "abusive." 

Unfair means that the act "causes or is likely to cause substantial injury which is not reasonably avoidable and is not outweighed by countervailing benefits to consumers or to competition." 

Abusive means if: 

"(i) "it materially interferes with the ability of a person to understand a term or condition of a product or service; or

(ii) it takes unreasonable advantage of:

(A) a lack of understanding on the part of a person of the material risk, costs, or conditions of a product or service;

(B) the inability of a person to protect such person's interests in selecting or using a product or service; or

(C) the reasonable reliance by a person on a person engaging in the act or practice to act in the relying person's interests." 

Businesses hit with claims under this amended law, remember YOU HAVE FIVE BUSINESS DAYS after receipt of a certified mail from the attorney general to advise as to why an action or proceeding should not be instituted. 

If you receive a certified letter from the NY Attorney General under the FAIR Act, you have five business days. Call Lieb at Law immediately.

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Employment Discrimination Law Updated in NYS - Discriminatory Effect is Enough

On December 19, 2025, the New York State Human Rights Law was extended by S8338, in adding a new subdivision 5-a to Executive Law 296, which provides for proving discrimination in employment without discriminatory intent, just discriminatory effect. Under the law, a discriminatory effect means that a practice "actually or predictably results in a disparate impact on a group of persons, because of their membership in a class protected under this section."  

To prove a case under subdivision 5-a, known as disparate impact discrimination, there is now a burden shifting formula:

• First, the Complainant must prove that "a challenged practice caused or predictably will cause a discriminatory effect."
• Second, the Respondent must prove "that the challenged practice is job related for the position in question and consistent with business necessity." 
• Third, the Complaint must prove "that the business necessity could be served by another practice that has a less discriminatory effect."

If a workplace policy disproportionately harms a protected group, intent no longer matters. Talk to Lieb at Law about your exposure or your claim.

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Is McDonnell Douglas Dead in NYS' Human Rights Law?

On December 19, 2025, NYS enacted A4040A and S8338, which defines standards for disparate impact discrimination claims in housing and employment respectively, but each also slipped in an easter egg, at new Executive Law 296(5-a)(e), which dramatically changes how disparate treatment discrimination claims will be defended under state law. Specifically, the subsection provides that "[a] demonstration that a practice is supported by a legally sufficient justification, as defined in paragraph (c) of this subdivision, may not be used as a defense against a claim of intentional discrimination." To be certain, under McDonnell Douglas Burden Shifting, which has been utilized to prove intentional discrimination since 1973, the defense of a case was the submission of proof of a non-discriminatory reason for the challenged act. It appears that defense is now dead in NYS - this is a seismic change in NYS discrimination law with ripples unknown. 

If you’re bringing or defending a discrimination case in New York, the rules just changed. Speak with Lieb at Law before you rely on outdated defenses.

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Housing Discrimination Law Updated in NYS - Discriminatory Effect is Enough

On December 19, 2025, the New York State Human Rights Law was extended by A4040A, in adding a new subdivision 5-a to Executive Law 296, which provides for proving discrimination in housing without discriminatory intent, just discriminatory effect. Under the law, a discriminatory effect means that a practice "actually or predictably results in a disparate impact on a group of persons or creates, increases, reinforces, or perpetuates segregated housing patterns because of race, creed, color, national origin, citizenship or immigration status, sexual orientation, gender identity or expression, military status, sex, age, disability, marital status, status as a victim of domestic violence, lawful source of income or familial."

To prove a case under subdivision 5-a, known as disparate impact discrimination, there is now a burden shifting formula:

• First, the Complainant must prove that "a challenged practice caused or predictably will cause a discriminatory effect."
• Second, the Respondent must prove "that the challenged practice is necessary to achieve one or more substantial, legitimate, nondiscriminatory interests of the respondent."
• Third, the Complaint must prove "that the substantial, legitimate, nondiscriminatory interests supporting the challenged practice could be served by another practice that has a less discriminatory effect."

If a housing policy shuts people out without saying it outright, that can now be illegal. Talk to a fair housing litigator at Lieb at Law, P.C. 

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Training Repayment Just Became Illegal in New York - Clawbacks Limited in NYS by the Trapped at Work Act

New York State has enacted the Trapped at Work Act by A584C, effective on December 19, 2025. This law expressly precludes employers from recovering on clawbacks for reimbursement of the cost of training and the law extends to protect not just employees, but also independent contractors, interns and many other workers. To be certain, while the law expressly prohibits and renders void any employee promissory note that is required as a condition of employment, it also excludes from its auspices, while expressly permitting, agreements under which a worker has to repay "sums advanced to such worker by the employer" that were not relevant to training. That said, the law provides workers with the ability to recover attorneys' fees if they prevail by rendering a promissory note sought to be enforced by the employer through suit, void. Additionally, the government can seek $1K to $5K per violation fines for violations. 

Facing a training clawback or promissory note? Talk to a New York litigator at Lieb at Law, P.C. before you pay a dime.