Some employers that rely on staffing arrangements, franchise relationships, or independent contractors may see meaningful shifts in federal labor policy because of a pair of federal agency rulemaking announcements released in February 2026. Specifically, the National Labor Relations Board (NLRB) published a final rule governing joint-employer status on Feb. 27, 2026. One day earlier, the U.S. Department of Labor’s (DOL) Wage and Hour Division announced a proposed rule revising the DOL’s standard for classifying independent contractors under certain federal employment laws, such as the Fair Labor Standards Act (FLSA) and the Family and Medical Leave Act (FMLA). Both actions represent a retreat from policies adopted during former President Joe Biden’s administration and a return toward standards associated with President Donald Trump’s first administration’s labor policy approach.
NLRB Officially Returns to Trump-Era Joint-Employer Standard
Two businesses may be considered joint employers under the National Labor Relations Act (NLRA) if they share or codetermine essential terms and conditions of employment for the same group of workers. That determination may carry consequences, including potential unfair labor practice liability and collective bargaining obligations. The NLRB’s joint-employer standard has shifted repeatedly over the past decade. In Browning-Ferris Industries, 262 NLRB No. 186 (2015), the Obama-era NLRB broadened the standard, holding that indirect control and an unexercised right to control another’s employees could support a joint-employer finding. The first Trump-era NLRB reversed course in February 2020, publishing a final rule providing that indirect and reserved rights to control were insufficient. Three years later, the Biden-era NLRB attempted to implement a broader joint-employer standard through rulemaking, but a federal district court in Texas vacated that rule and blocked its enforcement.
The NLRB’s Feb. 27, 2026, final rule largely returns to the 2020 standard. Under the rule, an entity will be considered a joint employer only if it exercises substantial direct and immediate control over the essential terms and conditions of employment for another employer’s employees. The rule defines those terms as wages, benefits, hours of work, hiring, discharge, supervision, and direction. Importantly, indirect control or an unexercised contractual right to control workers is not sufficient to establish joint-employer status. For businesses that rely on staffing agencies, subcontractors, or other contracted labor arrangements, the rule provides greater clarity on the standard to be applied by the NLRB.
DOL Proposes Return to 2024 Independent Contractor Rule
On Feb. 26, 2026, the DOL announced a proposed rule that would rescind the Biden administration’s 2024 independent contractor rule under certain federal employment laws. The 2024 rule applies a “totality of the circumstances” test, weighing multiple factors to determine whether a worker is an independent contractor, including:
- The worker’s opportunity for profit or loss depending on managerial skill;
- Investments by the worker and the employer;
- The permanence of the work relationship;
- The nature and degree of control over the work;
- Whether the work performed is integral to the employer’s business; and
- The worker’s skill and initiative.
The newly proposed rule would return to a modified version of the standard adopted during the first Trump administration. Under that standard, the DOL provides greater weight to two factors: (1) the nature and degree of control over the work; and (2) the worker’s opportunity for profit or loss based on initiative and/or investment. Other factors may also be considered, but they would receive less emphasis.
Although some employers that use independent contractors may welcome the proposed change, its practical impact may be limited. DOL rulemaking is not binding in federal courts, and employers located in states with more restrictive independent contractor standards, such as California, must continue to comply with those state standards.
Employers operating in California should note that federal rulemaking does not alter the state’s stricter worker classification framework. California generally applies the “ABC test,” under which a worker is presumed to be an employee unless the hiring entity can establish that the worker is free from control and direction, performs work outside the usual course of the company’s business, and is customarily engaged in an independently established trade or occupation. As a result, even if federal enforcement policy shifts toward a more flexible independent contractor standard, businesses operating in California must continue to evaluate worker classifications under the state’s more demanding legal requirements.
Because the DOL rule is still in the proposal stage, it will be subject to notice-and-comment rulemaking and may face legal challenges before taking effect.
Takeaways
The two latest rulemaking developments from the NLRB and DOL represent a shift in labor policy under the second Trump administration. Employers relying on staffing arrangements or independent contractors should consider reviewing their workforce structures and may wish to evaluate whether existing staffing, subcontracting, or contractor relationships remain appropriately structured in light of these developments.
In particular, employers may wish to:
- Evaluate staffing and subcontractor relationships to assess potential joint-employer exposure under the newly announced NLRB standard;
- Review independent contractor classifications under federal law while continuing to account for stricter state standards, including California’s ABC test; and
- Monitor further regulatory developments and potential litigation, which may affect the implementation of these rules.
