“Employee or independent contractor?” is not one universal test. In 2026, businesses need to keep at least three layers separate: the Department of Labor's federal wage-and-hour analysis, the IRS federal employment-tax analysis, and any state or local worker-classification rules that apply.
On February 26, 2026, the Department of Labor announced a Notice of Proposed Rulemaking to revise how it distinguishes employees from independent contractors under the FLSA. DOL also proposed to apply the analysis to the FMLA and MSPA. The comment period closed April 28, 2026. As of September 9, 2026, DOL's official rulemaking page still presents the framework as a proposal.
DOL says it is no longer applying the 2024 independent-contractor rule in its investigations. That does not mean businesses should treat the 2026 proposal as if it were already a final rule; current judicial precedent and the facts of the relationship remain important.
Document who controls scheduling, supervision, work methods, pricing constraints, and the ability to accept or decline work.
Document whether the worker can exercise managerial skill that changes profit or loss, including pricing, expenses, helpers, investments, or business development.
Document the specialized skill involved and whether the worker uses that skill with business initiative rather than relying primarily on company training or direction.
Document whether the relationship is project-based, sporadic, seasonal, recurring, or expected to continue indefinitely.
Document how the worker’s services fit into the business’s production process and how dependent that process is on the worker’s role.
The proposal says additional factors may also be relevant and emphasizes actual practices over what may be merely contractually or theoretically possible.
IRS Publication 15-A (2026) says all information that provides evidence of control and independence must be considered under the common-law rules. The IRS groups the evidence into three categories:
Review the right to direct what work is done and how it is performed, including instructions, evaluation systems, and training.
Review the financial and business aspects of the work, including expenses, investment, market availability, payment method, and profit or loss.
Review contracts, benefits, permanence, and whether the services are a key activity of the business.
| Question | Primary authority | 2026 status | Framework |
|---|---|---|---|
| Federal wage-and-hour / FLSA status | U.S. Department of Labor and federal courts | DOL announced a proposed rule February 26, 2026. Its official rulemaking page still describes the new framework as proposed as of September 9, 2026. | Proposed economic-reality analysis with two core factors, three other identified factors, and possible additional relevant factors. |
| Federal employment-tax status | Internal Revenue Service | IRS Publication 15-A (2026) continues to apply common-law principles based on the facts of the relationship. | Behavioral control, financial control, and type of relationship; all relevant facts and circumstances matter. |
| State and local status | Applicable state/local agencies and law | Rules can differ from federal tax and FLSA analyses and may use different tests, presumptions, exceptions, or industry-specific rules. | Review the jurisdictions that actually apply to the worker and engagement. |
As of Kelvaro’s September 9, 2026 review, DOL’s official page still describes the February 26 framework as a Notice of Proposed Rulemaking. The public comment period closed April 28, 2026.
No. DOL’s proposal addresses the FLSA and proposes the same analysis for the FMLA and MSPA. The IRS separately applies common-law principles for federal employment-tax purposes.
No. Information reporting does not determine worker status. Classification should be reviewed based on the actual relationship under each law that applies.
No. Software can organize facts, evidence, agreements, payments, and review dates, but it cannot replace the legal and tax analysis required for a specific relationship.
This page provides general educational information and does not constitute legal, tax, payroll, or employment advice.
Kelvaro can organize documentation, assignments, approvals, payments, and year-to-date records for legitimate contractor relationships without pretending the software makes the legal determination.
See Kelvaro's compliance boundaries →