Worker classification is the single largest regulatory exposure most specialty contractors carry, and the Labor Department just put a date on it.
In filings submitted to the White House Office of Management and Budget, DOL set an October 2026 deadline for the final version of its independent contractor rule. The proposal, published in February, pulls the agency’s reading of the Fair Labor Standards Act back toward the framework used during the first Trump administration.
What the economic reality test changes
The rule centers on an “economic reality test” built on two core factors: how much control a worker has over their work, and their opportunity for profit or loss based on initiative, investment, or both. That is a narrower inquiry than the six-factor totality test it replaces, and in practice it makes classifying a worker as a contractor easier to defend.
For construction, that cuts two ways. Legitimate independent trade contractors get certainty. So does the slice of the industry that has spent decades running crews through labor brokers and calling them 1099s. DOL puts the one-time compliance familiarization cost at $488 million, offset by nearly $683 million in savings it credits to “increased clarity.”
Whether courts agree is a separate question. Every version of this rule since 2019 has been litigated. There is no reason to think this one won’t be.
Joint employment, tip credits, and EEO-1
DOL is still working a proposed rule on joint employment under the FLSA. It announced a proposal in April and hasn’t committed to a final timeline. Joint-employer standards are the mechanism that pulls a general contractor into a subcontractor’s wage-and-hour liability, so read the silence as unresolved rather than settled.
A tip-credit proposal is slated for August, which matters far more to hospitality than to construction. New rules on work hours for minors and protections for pregnant workers are also queued.
Meanwhile, EEOC confirmed it will publish a notice of proposed rulemaking this month to end EEO-1 demographic data collection, with the comment period closing in September. The agency argued the requirement “was not mandated by statute, but was an agency-created requirement” that burdened employers, including small businesses.
What to do before October
Employment attorneys are telling clients to keep running EEO-1 processes anyway, both in case the program resumes and because several states run their own collections. Sound advice.
On classification, the useful move isn’t waiting for the final rule. It’s auditing which crews you currently treat as 1099 and asking whether they’d survive either test. A federal rule that makes misclassification easier to defend does nothing about California, New Jersey, or Massachusetts, where the ABC test still governs. Watch the Wage and Hour Division docket, but plan for the state you actually build in.