What is the new independent contractor rule?

The independent contractor rule is in flux. The Department of Labor's 2024 rule set a six-factor economic reality test weighing profit-or-loss opportunity, investment, permanence, control, how central the work is to the business, and skill. The DOL stopped enforcing it in 2025 and proposed rescinding it in early 2026, moving back toward a test centered on control and profit opportunity.

The IRS runs its own separate test focused on behavioral control, financial control, and the relationship type. A worker can pass one test and fail the other, which is why misclassification stays messy.

For 1099 workers and hiring businesses, the practical response is the same under any version of the test: a written agreement that reflects genuine independence, where the contractor controls how the work gets done, uses their own tools, and works for other clients. Paper that matches reality is the defense.

A clear client service contract documents that independent relationship from the first engagement.