More Workers to Be Classified As Independent Contractors Under Proposed USDL Rule
By Reuters | 26 Feb, 2026

The "economically dependent" criterion for deeming workers employees would be replaced by the degree of control standard favored by businesses.

President Donald Trump's administration on Thursday moved to scrap a rule long opposed by business groups for making it harder to classify workers as independent contractors rather than employees, who can cost a company more.

The U.S. Department of Labor released a proposal to repeal the 2024 rule, which it said was legally flawed and had deprived many workers of the flexibility that comes with independent contracting.

The rule, which the department stopped enforcing after Trump took office last year, requires a company to treat workers as employees under federal wage law when they are "economically dependent" on the company for work. The proposal would replace the rule with a standard favored by business groups that focuses on how much control companies have over workers. 

TRUCKING, RETAIL SALES AMONG INDUSTRIES TO BENEFIT

Getting rid of it will be a boon to companies in a range of industries, including trucking, healthcare, retail sales and app-based transportation and delivery services such as Uber and Instacart, which rely heavily on contractors and have been accused in scores of lawsuits of misclassifying workers to save money. 

Employees can cost businesses up to 30% more, according to several surveys, because they are entitled to the minimum wage, overtime pay, unemployment insurance, reimbursements for expenses and other protections not afforded to contractors.

Worker classification has been one of the most contentious employment-related issues over the last decade, and trade groups lobbied heavily to repeal the 2024 rule after an effort by Republicans in Congress to block it stalled. 

The rule had replaced a regulation adopted during Trump's first term that said workers who own their own businesses or have the ability to work for competing companies, such as a driver who works for Uber and Lyft, can be treated as contractors. The proposal announced on Thursday would largely revive that standard.

The proposal will be formally published on Friday, kicking off a 60-day period for public comment. 

The Biden-era rule had been expected to trigger a flood of new lawsuits alleging that workers had been misclassified as independent contractors. But that litigation never materialized, likely due to the limited amount of time the rule was in effect before the Labor Department last year signaled that it would be repealed. 

The rule was challenged in at least five lawsuits by freelance workers, employers and business groups, and those cases have either been dismissed or paused pending further rulemaking by the department. 

A Trump-appointed judge in New Mexico upheld the rule last year, rejecting a trucking company's claims that the Labor Department had exceeded its powers and improperly tried to rewrite federal law. The company's appeal has been put on hold and will likely be dismissed once the rule is repealed. 

(Reporting by Daniel Wiessner in Albany, New York, Editing by Alexia Garamfalvi, Rod Nickel)