The Trump administration’s Department of Labor recently proposed a new rule governing freelancers nationwide. It would establish a simple test to determine whether a person can be classified as an independent contractor or an employee.

This is a vexing question that the past several administrations have sought to address for varying reasons. The pendulum has swung back and forth between a more restrictive definition under the Obama administration, to a clearer, more permissible determination under the Trump administration, and back to a more restrictive definition during the Biden era, with that last rule currently in place.

Under the Trump 2.0 administration, the pendulum is swinging back in favor of a simpler definition that doesn’t thwart freelance work. In late February 2026, the Department of Labor announced that it would rescind the 2024 Biden rule and replace it with its own to take effect after the 60-day commenting period concludes.

The proposed rule is a positive development and should provide freelancers with an even greater sense of security. As my colleague, Jennifer O’Connell, explained: 

The 2026 Trump IC rule aligns with its 2021 counterpart in using its own “economic reality” test to determine whether an individual is in business for themselves or economically reliant on an employer. The 2026 IC rule provides greater clarity under the FLSA that independent contractors are not employees. It also expands on the concept of “economic dependence.”… By undoing the complex and concerning Biden-era regulation, this proposed rule will provide clarity and certainty to self-employed, freelancers, and gig workers and the businesses that depend on them nationwide.

Here are 5 key takeaways from the proposed rule:

  1. The goal of regulation should not be to pick winners and losers between models of work. “The Department’s role is not to incentivize or disincentivize companies from classifying workers as employees or independent contractors, either by placing a regulatory finger on one side of the scale or the other or by allowing legal ambiguity to discourage the correct classification of individuals.”
  2. The Biden rule was complex and confusing, harming economic growth. “For businesses, unclear regulations can deter growth and investment.”
  3. Complexity from the Biden rule destroys opportunity for workers. “Among other harms, an open-ended balancing analysis of six ambiguous elements can deter businesses from engaging with bona fide independent contractors or induce them intentionally to unnecessarily classify such contractors as employees.”
  4. The default position is no longer that individuals are employees and must prove otherwise.
  5. Streamlining and simplifying the standard will reduce costs and reporting burdens on businesses and independent contractors. “This NPRM, if finalized, is expected to result in cost savings to firms, including increased clarity, reduced misclassification, reduced litigation, and increased efficiency.”

Against the backdrop of these considerations, the new rule aims to move policy more in line with court precedent and established legal analyses.

Replacing the confusing six-factor test, in which no factor carries greater weight or is more determinative, is a two-factor economic reality test. The two primary factors to determine whether someone is an independent contractor are the nature and degree of control over work and the opportunity for profit or loss. The rule states the following:

Given these two core factors’ greater probative value, if they both point towards the same classification, whether employee or independent contractor, there is a substantial likelihood that is the individual’s accurate classification.

Furthermore, the Department of Labor believes that control over work could be determinative enough that opportunity for profit or loss would not need to be considered. In effect, boiling down the test to just one factor.

Individuals, small businesses, organizations, associations, and other stakeholders are invited to comment on the rule and provide input before it’s finalized later this year.

Bottom Line

Freelancers have been held in limbo as legal challenges to the Biden-era rule have played out in the courts. Rescinding the Biden rule and replacing it with a new Trump-era rule is a win for independent workers and the companies that depend on them. We hope it will be finalized quickly. However, to ensure that a future president doesn’t undo this rule, Congress must codify a clear, concise economic test. This new rule is a good place to start.