The U.S. Department of Labor just proposed rescinding the 2024 federal independent contractor rule and moving back toward a framework that puts heavier emphasis on two factors:

• Control
• Opportunity for profit or loss

At the federal level, the test would again center on whether the worker is truly in business for themselves — or economically dependent on the company.

That’s the headline. Here’s the part California employers need to hear: A new DOL rule won’t make your contractor model safer in California.

The proposed rule would move away from the current federal six-factor “no factor weighs more than another” framework and return to a model that gives special weight to control and entrepreneurial opportunity.

But in California, the primary wage-and-hour standard is still the ABC test under AB 5 — which is dramatically stricter than the federal “economic realities” analysis.

Passing federal scrutiny does not mean you pass in California.

What Actually Matters for California Employers

If the new DOL rule becomes final, here’s what we will tell our clients:

1. Don’t confuse federal relief with California compliance. You still have to satisfy the “ABC test” unless a statutory exemption applies.
2. Control remains dangerous — even if exercised “lightly.” Reserved rights, quality control requirements, schedule expectations, integration into operations — these facts matter under both federal and California standards.
3. Contracts won’t save you. If your relationship with a contractor looks like employment, regulators and plaintiffs’ lawyers will treat it like employment.
4. Multi-state employers need two analyses. Federal economic realities. California ABC test. They are not interchangeable.

The Bigger Risk

The real exposure in California isn’t just back wages. It’s:

• Overtime
• Meal and rest premiums
• Expense reimbursement
• Waiting time penalties
• Wage statement penalties
• PAGA exposure

Independent contractor misclassification here is not a paperwork problem. It is a litigation multiplier.

The Practical Question

If the DOL finalizes this proposal, the federal framework may feel more predictable. That does not change this reality: If your contractor model would make a California judge uncomfortable, it should make you uncomfortable.

Now is a good time to audit. Not because Washington changed direction. But because plaintiffs’ lawyers in California won’t.