A New Federal Proposal Would Further Undercut Home Care Workers’ Labor Rights

The U.S. Department of Labor (DOL) has proposed a rule that would make it easier for employers to misclassify their workers as independent contractors. Misclassification already occurs most often in underpaid, labor-heavy sectors, like home care, where women and people of color are overrepresented. This change would further strip direct care workers—particularly home care workers—of fundamental labor protections at a moment when the workforce is already under attack from minimum wage and overtime rollbacks, immigration restrictions and deportations, and disastrous cuts to Medicaid.  

Misclassification is a Significant Job Quality Issue for Home Care Workers 

As documented by the National Employment Law Project, most home care workers at home care agencies do not operate as independent contractors. Instead, they have all the hallmarks of an employee: they perform work that is integral to their agencies’ core business and generally have little ability to set their own duties, hours, or wages, among other factors.  

Yet some agencies require workers to sign independent contractor agreements as a condition of employment. That enables the agencies to gain a competitive advantage by charging lower rates and/or offering higher wages—but only by shifting the costs of payroll taxes, insurance, and legal obligations to their workers.  

For workers, being misclassified as an independent contractor means losing access to employee benefits and protections, such as minimum wage and overtime rights, unemployment insurance, workers’ compensation, employer-provided health insurance, paid leave, and anti-discrimination protections. As noted, independent contractors also assume the full burden of payroll taxes—paying both the employer and employee shares. 

The Economic Policy Institute estimates that misclassification costs home health and personal care aides between $7,229 and $10,247 per worker per year in lost compensation and benefits. In an occupation where the median annual wage is only $22,429, that represents a devastating loss. 

The Scale of the Problem 

While the full measure of this issue is difficult to determine, a 2021 study found that nearly 13 percent of personal care aides nationally were classified as independent contractors, with considerable variation by state. While not representing misclassification in every case, this figure highlights the prevalence of independent contractor status among home care workers and their potential risk of misclassification.  

Misclassification enforcement actions also underscore how widespread this issue is in home care. Maryland’s Joint Enforcement Task Force on Workplace Fraud reported in January 2026 that state agencies had identified almost 8,000 misclassified workers statewide and uncovered more than $174 million in total unreported wages, with home care identified as one of the sectors where misclassification is particularly common. 

In a 2025 investigation, the U.S. DOL found that two Louisiana home care companies had misclassified nearly 160 workers in total, failing to pay over $422,000 in overtime wages. And in a case last year, California’s attorney general secured a $10 million judgment against an in-home caregiving company whose workers were sometimes paid as little as $5 per hour for 24-hour shifts, due to their misclassification as contractors. 

The transfer of costs and risks from employers to home care workers harms those who already earn some of the lowest wages in the U.S. economy. Furthermore, misclassification doesn’t just impact the workforce—it destabilizes an already fragile care system. When home care workers lose basic protections, recruitment and retention suffer, turnover accelerates, and access to much-needed care erodes for individuals and families. 

This Proposed Rule Would Make Misclassification Worse 

The specific details of the DOL’s proposal are particularly harmful for the home care sector. Under the current approach to classifying an employee, the fact that home care workers perform work that is integral to a home care agency’s business, have ongoing relationships with the agency, and depend on the agency for training all weigh strongly towards full status as employees. The DOL’s new proposal would demote these considerations to secondary status that can be overridden by other factors (like scheduling flexibility)—even if the home care agency is acting like a traditional employer by assigning clients, setting pay rates, and managing the scope of work.  

What You Can Do 

Join PHI in submitting comments on this proposed rule by April 28, 2026. The DOL has explicitly requested comments on the consequences of this proposed change on industries, like home care, that are more likely to rely on independent contractors than many other industries. It is important for policymakers to hear the voices of direct care workers, advocates, and the older Americans and people with disabilities and chronic illnesses receiving home care. Please feel free to use claims and content from this article in your comments.   

Support state-level protections, oversight, and enforcement of misclassification. Whatever happens at the federal level, state laws can and do provide employment safeguards. Advocates should urge their state legislatures to adopt or strengthen worker classification standards, oversight, and enforcement. New Jersey is an example: the state’s Task Force on Employee Misclassification catalyzed an effort to tighten rules and enforcement, leading to a misclassification enforcement program that has assessed more than $10.6 million in penalties to be paid directly to over 12,500 misclassified workers since 2021. Focused more specifically on home care, Maryland’s Homecare Workers Rights Act requires all Medicaid home care providers to classify their home care workers as employees. As noted, Maryland has also established a Joint Enforcement Task Force on Workplace Fraud that brings together multiple state agencies for coordinated investigations and data sharing.

A Call to Protect Direct Care Workers 

For more than 30 years, PHI has documented the connection between direct care job quality and the strength of our long-term care system. This proposed rule threatens that connection by rolling back another layer of labor protections from this workforce, even as demand for these workers continues to rapidly grow—which is not just unjust, but irrational. PHI urges the DOL to withdraw this proposal and instead pursue policies that value direct care workers as the essential employees they are.