On Feb. 26, 2026, the U.S Department of Labor (USDOL) announced a notice of proposed rulemaking to revise its analysis for distinguishing between employees and independent contractors under the Fair Labor Standards Act (FLSA). Specifically, the USDOL is proposing to formally rescind a 2024 rule that it last year had already announced it would no longer enforce. The 2024 rule was based on analysis of six equally weighted economic reality factors to determine whether a worker was economically dependent on an employer for work, and therefore classified as an employee.
The 2026 rule identifies 5 rules, giving precedence to two core factors: the nature and degree of the individual’s control over the work; and the individual’s opportunity for profit or loss. The analytical process as outlined in the rule makes it easier for an employer to classify a worker as an independent contractor rather than an employee.
Public comment on the proposed rule is invited through April 28, 2026, at https://www.regulations.gov/docket/WHD-2026-0001
For more information, see the USDOL press release or the proposed rule.
Note that after the proposed rule has been finalized, Hawaii employers will still need to follow Hawaii law regarding worker classification and unemployment insurance eligibility, using the “ABC test” in which to be considered an independent contractor, the following conditions must be met:
A) Individual must be free from control or direction; and
B) Service must be performed outside the usual course of business or place of business; and
C) Individual must be customarily engaged in an independent occupation, trade, profession, or business of the same nature as that involved in the contract of service.