Department of Labor Proposes New Independent Contractor Rule

Labor
Published

The U.S. Department of Labor (DOL) has announced a proposed rule clarifying the definition of employee under the Fair Labor Standards Act (FLSA) as it relates to independent contractors.

In a press release, the DOL said its proposed rule:

  • Adopts an “economic reality” test to determine a worker’s status as an FLSA employee or an independent contractor. The test considers whether a worker is in business for himself or herself (independent contractor) or is economically dependent on a putative employer for work (employee);
  • Identifies and explains two “core factors,” specifically the nature and degree of the worker’s control over the work, and the worker’s opportunity for profit or loss based on initiative and/or investment. These factors help determine if a worker is economically dependent on someone else’s business or is in business for himself or herself;
  • Identifies three other factors that may serve as additional guideposts in the analysis: the amount of skill required for the work; the degree of permanence of the working relationship between the worker and the potential employer; and whether the work is part of an integrated unit of production; and
  • Advises that the actual practice is more relevant than what may be contractually or theoretically possible in determining whether a worker is an employee or an independent contractor.

NAHB has called on DOL to take steps to provide greater clarity to employers and workers in light of the often conflicting federal tests that exist to determine who is an employee and who is an independent contractor.

The proposed rule would also provide more clarity to shield more employers from misclassification claims, which occur when an employer incorrectly defines a worker as an independent contractor rather than an employee.

NAHB will review the rule in more detail once it is published in the Federal Register, and interested parties will have 30 days to submit comments.

For more information, contact David Jaffe.

Subscribe to NAHBNow

Log in or create account to subscribe to notifications of new posts.

Log in to subscribe

Latest from NAHBNow

IBS | Remodeling
Aug 24, 2026
Invisible Upgrades Key to Performance Goals of IBS 2027 Show Home

A full-scale reinvention of a dated, luxury home is well underway for The New American Remodel 2027. Much of the recent work has focused on changes that won't be visible once the project is finished but are critical to its lofty, high-performance goals.

Housing Finance
Aug 21, 2026
ROAD to Housing’s Community Bank Provisions Broaden Builder Financing Options

The 21st Century ROAD to Housing Act includes nine provisions designed to strengthen small financial institutions, including community banks, by easing regulatory burdens, reducing funding costs, and encouraging the creation of new banks.

View all

Latest Economic News

Economics
Aug 21, 2026
Second Quarter Declines for Single-Family Built-to-Rent

Single-family built-for-rent (SFBFR, or built-to-rent (BTR)) construction fell back in the second quarter of 2026, as a higher cost of financing, increased multifamily supply and policy concerns over Congressional legislation related to institutional capital froze parts of the development market.

Economics
Aug 20, 2026
Short-Term Townhouse Construction Weakness

Second quarter 2026 data reveal softer conditions for townhouse construction as housing affordability challenges affect homebuyer demand, particularly in larger metropolitan markets.

Economics
Aug 19, 2026
Flat Conditions for Custom Home Building

With overall single-family construction down almost 7% for the first seven months of 2026, custom home building has been a relative bright spot for the residential construction industry.