April 28, 2026
U.S. Department of Labor
Wage and Hour Division
Attn: Andrew Rogers, Administrator
Posted on regulations.gov
Docket No. WHD-2026-0001 RIN 1235–AA46
Re: Employee or Independent Contractor Status Under the Fair Labor Standards Act, Family and Medical Leave Act, and Migrant and Seasonal Agricultural Worker Protection Act
On behalf of National Taxpayers Union, the nation’s oldest taxpayer advocacy organization, we write with brief remarks on WHD–2026–0001, a proposed rule to “rescind the analysis for determining employee or independent contractor status under the Fair Labor Standards Act (FLSA) currently set forth in 29 CFR part 795 and replace it with the analysis that it published and adopted in a prior final rule dated January 7, 2021, with a few modifications.”
Introduction
National Taxpayers Union (NTU) appreciates the opportunity to comment on the Department of Labor’s proposed rule on independent contractor classification. NTU was founded in 1969 to achieve favorable policy outcomes for taxpayers with Congress and the executive branch. Our experts and advocates engage federal policymakers on important matters affecting taxpayers in a variety of settings, including administrative actions that influence the cost and predictability of federal regulations.
This proposed rulemaking represents a significant shift in worker classification policy. The Department proposes to abrogate the 2024 independent contractor rule, which created an unweighted, six-factor “totality of the circumstances” analysis used for classifying workers as employees or independent contractors under the Fair Labor Standards Act (FLSA). Instead, the Department proposes a streamlined approach that prioritizes core elements of the traditional economic reality test, particularly the degree of control exercised by the company and the worker’s opportunity for profit or loss. This framework restores a longstanding legal standard that provided businesses and workers with greater clarity and certainty before the disruption of the 2024 rule.
Clear and consistent worker classification standards are essential for a prosperous economy. Regulatory ambiguity increases compliance costs for businesses, invites costly litigation, and ultimately raises prices for consumers while stifling economic opportunity for workers who value flexible employment arrangements. As such, NTU commends the Department of Labor for its effort to rescind the convoluted 2024 independent contractor classification standard and replace it with a more predictable framework grounded in longstanding economic reality principles. This approach preserves flexibility for the millions of Americans who decide to go into business for themselves as freelance or gig workers and protects them from being mistakenly classified as employees.
The Importance of Regulatory Clarity For Independent Contracting
While independent contracting is often viewed through the narrow lens of gig economy drivers, independent work arrangements have become a cornerstone of the modern U.S. economy, with more than 70 million Americans now working as freelancers or contract workers.1 In 2023, freelancers made up 38% of the U.S. workforce and contributed roughly $1.27 trillion in annual earnings to the U.S. economy, which represents a 78% increase compared to 2014.2 An extensive body of research3 indicates that many workers value the flexibility of independent contractor relationships compared to the strictures of traditional wage employment. Recent data from the Bureau of Labor Statistics show that approximately 80% of independent contractors report favoring their current work arrangement, compared to just 8.3% who would prefer traditional employment.4
Independent contractor arrangements are commonplace across both blue-collar and white-collar occupations, spanning industries as diverse as health care, software engineering, professional services, construction, and agriculture. Such arrangements generate significant value for workers and employers alike by allowing them to use labor services in situations where a traditional employment relationship is either impractical or uneconomic.5 For example, in the health care sector, hospitals often rely on “locum tenens”6 physicians to fill temporary staffing shortages. This allows providers to quickly respond to changing patient needs without the costs and administrative burdens associated with full-time employment. Treating these doctors as traditional W-2 employees for short-term assignments would, in many cases, prove prohibitively expensive and limit the ability of hospitals to maintain standards of care.
The flexibility provided by independent contracting plays an important role in supporting the dynamism of the U.S. labor market. Compared to many other industrialized countries with more rigid labor laws, the U.S. has generally made it easier for businesses to expand and adjust their workforce as market conditions change. That flexibility helps businesses remain competitive. And, more importantly, it expands access to work, especially for those with fewer skills or those reentering the labor force after experiencing long-term unemployment. It’s no surprise that the U.S. has historically had lower rates of structural unemployment than many industrialized countries with highly regulated labor markets.7 Preserving these economic benefits requires clear and consistent regulatory standards, as uncertainty over worker classification will lead businesses to avoid hiring independent contractors altogether for fear of incurring legal liability.
Shortcomings of the 2024 Rule
The 2024 independent contractor rule introduced a complicated and ambiguous standard that increased uncertainty for employers and workers alike. The rule was premised on the idea that many employees are deliberately misclassified as independent contractors by their employers to avoid the costs associated with traditional employment, such as payroll taxes and employee benefits. This led the Biden Administration to adopt a more expansive, multi-factor “totality of the circumstances” approach for determining a worker’s status as an employee or independent contractor. Under this framework, worker status was determined by six factors: opportunity for profit or loss, investments by worker and employer, degree of permanence, nature and degree of control, the integral nature of the work, and the worker’s skill and initiative.
However, the Biden Administration failed to assign a predetermined weight to any specific factor. The lack of a clear hierarchy forced businesses to hedge against the possibility that a single factor could trigger a misclassification finding and the significant legal liabilities that would entail. This open-ended balancing made it easier to presume employee status and dramatically increased the risk of reclassification for independent contractors. As a result, businesses were financially incentivized to reduce dependence on independent employment arrangements.
Benefits of the Proposed Rule
The proposed 2026 rule represents a sorely needed return to a traditional economic reality test that promotes clarity over complexity. By prioritizing core factors such as the degree of control over the work and the worker’s opportunity for profit or loss, this weighted standard offers a practical method for determining whether a worker is in business for himself or economically dependent on an employer. In cases where the two primary factors fail to yield a clear answer on worker status, the rule examines secondary indicators such as skill, the permanence of the relationship, and the degree to which work is integrated in a business’s operations. This structured approach effectively returns to the 2021 rule on independent contractor classification issued by the first Trump Administration and is in line with longstanding judicial precedent.
Businesses and independent contractors stand to benefit significantly from this revised worker classification standard. By focusing on the most relevant indicators of independence, specifically who directs the work and who bears the financial risk, the 2026 rule aligns federal regulation with the real-world behavior of independent entrepreneurs who manage their own risks. As such, making a determination about a worker’s status is straightforward compared to the 2024 rule’s “totality of the circumstances” test, which was a recipe for endless legal disputes. With a clear standard, businesses can hire independent contractors without having to worry about the legal and financial ramifications of improper classification.
Conclusion
NTU strongly supports the Department’s efforts to revisit and simplify the standards that govern independent contractor classification under the FLSA. The most important contribution policymakers in Washington can make toward a strong, prosperous economy is to set predictable and reliable rules of the game that give economic actors the confidence to take risks. The 2024 rule’s overly complicated standard was not just an exercise in bureaucratic mismanagement—it was an underhanded attempt to reclassify as many independent contractors into employees as possible, with little regard for the preferences of millions of independent workers across the country who value their flexible work arrangements.
At a time when affordability is a widespread concern among the American people, policymakers should double-down on efforts to keep the U.S. labor market as dynamic as possible. Restoring longstanding judicial precedent to worker classification standards is a good first step. Yet, policymakers should go further than streamlining labor regulations and consider additional reforms that lower barriers to flexible work arrangements. This could include allowing businesses to offer independent contractors more benefits without raising the risk of reclassification. Furthermore, policymakers should also explore ways to provide independent contractors with expanded access to portable benefits and health savings accounts. Together, these practical steps empower workers to pursue the employment arrangements that best suit their individual circumstances.
Thank you for your consideration of these comments, and, should you have any questions on this or any other regulatory matter before the Department of Labor, we are at your service.
Sincerely,
Alexander Ciccone
Policy and Government Affairs Manager
National Taxpayers Union
1 https://www.mbopartners.com/state-of-independence/
2 https://www.upwork.com/press/releases/upwork-study-finds-64-million-americans-freelanced-in-2023-adding-1-27-trillion-to-u-s-economy
3 https://iccoalition.org/wp-content/uploads/2014/07/Role-of-Independent-Contractors-December-2010-Final.pdf
4 https://www.bls.gov/news.release/conemp.htm
5 https://iccoalition.org/wp-content/uploads/2014/07/Role-of-Independent-Contractors-December-2010-Final.pdf
6 https://comphealth.com/locum-tenens
7 https://www.imf.org/external/pubs/ft/fandd/basics/unemploy.htm