Federal Labor Agencies Formalize Employer-Friendly Shift Under Trump Administration

Two months into the new year, federal labor agencies have announced significant regulatory changes that could reshape how your business engages staffing agencies, contractors, and gig workers. 

On February 26, 2026, the National Labor Relations Board (“NLRB”) formally reinstated its 2020 joint employer rule, while the U.S. Department of Labor (“DOL”) proposed returning to the 2021 independent contractor test. As we have covered in prior posts, both moves signal a meaningful shift toward employer-friendly labor standards. Here’s what you need to know.

The NLRB Returns to the 2020 Joint Employer Framework

The NLRB has formally returned to the joint employer standard established during President Trump’s first term, replacing the text of the vacated regulation with that of the previously adopted 2020 standard. Under the 2020 standard, a company is considered a joint employer only if it possesses and actually exercises substantial, direct, and immediate control over essential terms and conditions of employment. “Essential terms and conditions of employment” include wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.

This approach stands in contrast to the 2023 regulation, which would have allowed joint employer findings based on indirect control or even reserved (but unexercised) authority-a standard similar to the Obama-era Browning-Ferris decision. The 2023 rule was vacated by a federal district court before taking effect, following challenges from business groups who argued it was inconsistent with common law principles and overly expansive.

Under the reinstated 2020 standard, the analysis centers on whether an entity actually exercises direct control, not merely whether it retains the contractual right to do so. While joint employer determinations will continue to be made based on the totality of the circumstances, the emphasis now remains squarely on tangible, exercised control over core employment decisions.

For employers operating through staffing arrangements, subcontracting relationships, or vendor networks, this narrower test provides greater predictability. But there are two significant caveats.  First, companies should be very mindful that states, such as Connecticut and Massachusetts, may have different tests for determining the joint-employer status.   In addition, joint employer status-if established-still carries significant consequences, including shared collective bargaining obligations and potential exposure for unfair labor practices. Ongoing litigation could again reshape the standard. The 2020 standard remains subject to a Service Employees International Union challenge pending in federal appeals court. If the union prevails, the NLRB could be required to adopt a broader standard that considers indirect or reserved control, similar to the approach taken in Browning-Ferris.

The DOL Proposes a Return to the 2021 Independent Contractor Rule

Simultaneously, on February 26, 2026, the United States Department of Labor announced a proposed rule to rescind and replace the 2024 Biden-era regulation governing worker classification under the Fair Labor Standards Act, Family and Medical Leave Act, and Migrant and Seasonal Agricultural Worker Protection Act. The proposed rule, published in the Federal Register on February 27, 2026, introduces an “economic reality” test that DOL Wage and Hour Division Administrator Andrew Rogers described as “generally similar” to the 2021 Rule from President Trump’s first term.

The proposal restores the longstanding “economic reality” test, which asks whether a worker is economically dependent on the employer (suggesting employee status) or is in business for themselves (suggesting independent contractor status).

Under the proposed 2021 framework, the test contains two “core factors” that carry greater weight:

• The nature and degree of control over the work; and
• The worker’s opportunity for profit or loss based on initiative or investment.

Additional factors may also be considered, including:

• The level of skill required;
• The permanence of the working relationship;
• Whether the work is part of an integrated unit of the business; and
• The worker’s investment in equipment or materials.

According to the DOL, the 2024 Biden-era rule introduced unnecessary complexity and redundancies that may have created uncertainty for businesses and potentially discouraged legitimate independent contractor relationships. Secretary of Labor Lori Chavez-DeRemer emphasized that the proposal “seeks to protect these workers’ entrepreneurial spirit and simplify compliance for American job creators navigating a modern workplace, all while maintaining robust protections for employees under the Fair Labor Standards Act.” The public comment period remains open until April 28, 2026. If finalized, the rule would take effect following publication of the final rule in the Federal Register.

Impact on Employers

With respect to joint employer liability, the adoption of the 2020 standard offers companies greater protection when engaging staffing agencies, contractors, and franchisees. Employers should still exercise caution regarding the degree of control they exert over third-party workers, but the “substantial direct and immediate” control threshold is a more predictable standard than the approach previously proposed under the Biden administration.

Regarding worker classification, the proposed independent contractor rule provides clearer guidance for businesses that rely on independent contractors. The emphasis on control and opportunity for profit or loss as “core factors” aligns with the 2021 Rule and traditional common law principles, giving businesses more flexibility to structure independent contractor relationships. However, employers should note that the rule remains a proposal subject to the public comment process and potential legal challenges. It is also important to remember that many states, including Connecticut, impose their own, often stricter, classification standards such as the “ABC Test.” Even if the proposed rule is finalized, employers must continue to ensure compliance with applicable state wage and hour laws.

Please reach out to our Labor & Employment team should you have any additional questions.