Turning Back Time: The DOL and NLRB Revive Trump-Era Classification Standards

Key Takeaways: 

1. DOL Moves to Reinstate Business-Friendly Independent Contractor Standard: The Department of Labor has proposed rescinding the 2024 independent contractor rule and returning to a more flexible “economic reality” test that emphasizes two core factors — control and opportunity for profit or loss — potentially narrowing federal misclassification exposure under the FLSA.
2. NLRB Restores 2020 Joint Employer Rule: The NLRB has formally reinstated the Trump-era standard requiring “substantial direct and immediate control” for joint employer status, limiting liability based solely on indirect or reserved control and reducing bargaining and unfair labor practice exposure for many businesses.

Despite the clocks moving forward this week, federal employer classification standards are turning back. The Department of Labor (DOL) and National Labor Relations Board (NLRB) have recently moved to restore Trump-era employment standards that reshape worker classification for businesses across industries. These developments mark a significant shift in federal labor policy with implications for employers navigating classification, franchising, staffing and gig-economy models.

DOL Proposes Rescission of 2024 Independent Contractor Rule

After abandoning the Biden administration’s 2024 independent contractor test, the DOL announced a proposed rule on Feb. 26, 2026 to replace its current enforcement scheme under the Fair Labor Standards Act (FLSA), which applied a six-factor “totality of the circumstances” economic realities analysis without assigning weight to any particular factor. Under the DOL’s proposal, the independent contractor standard will again be tested by the “economic reality,” focusing on whether an individual is dependent on an employer or in business for themselves. This signals a return to a more flexible, business-friendly analysis. DOL Wage and Hour Division Administrator Andrew Rogers stated: “Generally, if a worker is economically dependent on an employer for work, he or she is an employee. Generally, if a worker is in business for him or herself and isn't dependent on an employer for work, the worker is an independent contractor.”

While the 2024 rule weighed six factors equally, the DOL’s proposal will apply a list of five non-exhaustive factors while elevating two to “core factors”:

• the nature and degree of control; and
• the worker’s opportunity for profit and loss.

The others become less probative “guideposts”:

• skill required;
• permanence of the relationship; and
• integration into the employer’s production process.

The intent is to look at the “actual practice” of the parties rather than what may be contractually or theoretically possible. In emphasizing control and opportunity for profit/loss, the DOL appears to be narrowing employers’ misclassification exposure under the FLSA, particularly in industries where workers exercise meaningful entrepreneurial discretion.

Although this shift aligns more closely with Supreme Court and federal appellate precedent, employers should not assume that federal enforcement risk will disappear. Private plaintiffs’ attorneys are likely to continue pursuing collective and class actions, and state-law classification standards remain unaffected. Employers should review their current classification practices and prepare to update policies and training.

NLRB Reinstates Trump-Era 2020 Joint Employer Standard

The NLRB also formally reinstated the 2020 joint employer rule on Feb. 26 after a federal court vacated the Biden-era’s broader definition. Under the rule, joint employer status requires “substantial direct and immediate control” over one or more essential terms and conditions of employment such that it “meaningfully affects matters relating to the employment relationship.” Further, “substantial direct and immediate control” must have a “regular or continuous consequential effect” on employment terms, not control exercised only on a “sporadic, isolated, or de minimis basis.” Reserved or indirect control alone is generally insufficient.

Reinstating the 2020 rule is expected to have an outsized impact on franchisors, staffing companies, private equity-backed platforms and businesses operating through layered contracting relationships. By requiring exercised or direct control, the rule will likely meaningfully limit federal bargaining obligations and unfair labor practice exposure tied to another entity’s workforce. Still, contractual language and day-to-day operational practices must align to avoid inadvertently triggering joint employer status.

Employers should review current workforce relationships to assess potential obligations for bargaining and unfair labor practice exposure. Companies with pending NLRB matters or organizing activity should evaluate how the reinstated standard may affect strategy, particularly where joint employer allegations were previously asserted.

Why This Matters

Together, these developments signify the Trump administration’s employer-friendly approach to rulemaking and reflect a narrower federal interpretation of independent contractor and joint employer standards. While both rules may face continued legal scrutiny, employers should use this moment to proactively review independent contractor models, audit franchise and staffing arrangements, align operations with contractual intent and evaluate classification risks under relevant state standards.

Polsinelli will continue to report on any DOL and NLRB updates related to these standards. Please contact your Polsinelli attorney for more information.