The proposed rule, “Employee or Independent Contractor Status under the Fair Labor Standards Act, Family and Medical Leave Act, and Migrant and Seasonal Agricultural Worker Protection Act,” would rescind the current 2024 standard and replace it. The change would make it easier for employers to classify workers as independent contractors rather than employees.
“How a worker is classified is not an abstract policy question for this office; it is a matter with immediate and measurable consequences for Maryland’s revenues,” said Comptroller Brooke Lierman, “This proposed regulation would bring financial harm to thousands of Maryland workers, and to the families who depend on their wages.”
The Comptroller’s comments highlight that worker classification directly impacts state revenues and public programs. Systems such as unemployment insurance, workers’ compensation, paid leave, and income tax withholding rely on workers being classified as employees. When workers are instead classified as independent contractors, contributions to these systems are reduced or eliminated.
The Department of Labor estimates the proposed rule could increase independent contracting arrangements by as many as 750,000 nationwide. However, the agency’s regulatory analysis does not account for the resulting fiscal impact on states. Using the Department’s own projections, the Comptroller’s office estimates that shifting 500,000 workers to independent contractor status, the midpoint of the Department of Labor’s projections, could result in more than $970 million in lost contributions to state social insurance programs nationwide. Reclassifying just 1% of American workers as independent contractors would cost unemployment insurance revenue nearly $200 million annually.
Worker misclassification is already a growing concern in Maryland. According to the state’s Joint Enforcement Task Force 2025 Annual Report, misclassification resulted in $52 million in unreported taxable wages in fiscal year 2025, along with $3.6 million in tax, interest, and penalties assessed against noncompliant businesses. The number of misclassified workers rose nearly 39% from 2024 to 2025.
The Comptroller stated that the proposed rule could exacerbate these trends by narrowing the analysis used to determine worker status and making it easier to classify workers as independent contractors, even when they are economically dependent on a single employer.
The Comptroller also raised concerns about increased costs to state-funded safety net programs. Independent contractors are less likely to receive employer-sponsored benefits, such as health insurance and workers’ compensation, increasing reliance on Medicaid and other public services.
“I do not oppose independent contracting,” Comptroller Lierman said. “I oppose this proposed rule, which would impose significant and unquantified fiscal costs on Maryland and states across the country without adequate justification. The Department has an obligation to fully evaluate these impacts before moving forward.”
Comptroller Lierman urged the U.S. Department of Labor to withdraw the proposed rule and conduct a more comprehensive analysis of its fiscal and economic consequences.
Comptroller Lierman’s submitted comment to the U.S. Department of Labor can be found here.
