I’ve talked to enough founders scaling past their first 50 employees to know the pattern. Someone reads that federal rules on independent contractor classification are getting friendlier, and they relax. They start hiring contractors faster, expanding into new states, and treating each new hire as a quick win rather than a compliance decision.

That relief is premature. The Department of Labor proposed a new rule in February 2026 that would make it easier, at the federal level, to classify a worker as an independent contractor rather than an employee. But federal rules are the floor, not the ceiling. States like California, Massachusetts, and New Jersey apply their own, often stricter, tests — and none of them care what Washington just decided. New Jersey proved that this summer, when the state reached a $2.77 million settlement with logistics company STG Logistics over misclassifying hundreds of truck drivers as independent contractors. It was the first case resolved under a 2021 New Jersey law that lets the state sue employers directly over misclassification, entirely separate from federal enforcement.

Any federal change is one input into your hiring strategy, not the whole picture, and it only means something once you’ve checked it against the states you actually operate in. For companies scaling through contractors, remote hires, or expansion into new states, that gap between federal and state rules is exactly where risk hides. Here’s how I’d think about closing it:

1. Run a state-by-state check before you hire, not after

A contractor arrangement that clears federal scrutiny can still fail a state test. And it can pass in one state while failing in the next. Say, for example, a marketing company classifies a marketing consultant in Texas as an independent contractor. Texas relies on a common-law control test that’s generally considered business-friendly, and the classification holds. Hire someone in the identical role in California, though, and the calculus changes. California’s ABC test asks whether the work falls outside the company’s usual course of business. For a marketing company hiring a marketing consultant, it doesn’t. So, the same role that worked in Texas fails in California.

That’s not a narrow risk. An estimated 11.9 million people in the U.S. work as independent contractors as their primary job, according to the Bureau of Labor Statistics’ most recent contingent workforce survey. That’s likely a conservative count, since it only captures contractor work as someone’s main job, not secondary income. Any company hiring contractors across state lines is playing this same game somewhere in its workforce.

The practical guidance from employment attorneys has consistently been the same, whether you’re hiring someone in Maine or Oregon: Classify workers based on the rules in the jurisdiction where they perform the work, not the jurisdiction where your company is headquartered. Building that check into your hiring process, before an offer goes out, costs a lot less than fixing it after the fact.

2. Revisit your classification practices when you scale into a new state or hiring model

Growth is exactly when classification agreements stop matching reality. A contractor relationship that made sense when someone worked a few hours a week for one client can look very different once they’re full-time and exclusive. The proposed federal rule change is a good forcing function to reexamine how your company classifies its workforce, but the real trigger should be internal. Every time you add a state or change how a role is structured, the classification question needs to be asked again.

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