Welcome to Issue #5 of The Compliance Brief. Every Tuesday I break down the HR and labor law updates that actually matter to small businesses — in plain English, no legal jargon.

The DOL Wants to Change How You Classify Contractors

If your business uses freelancers or 1099 workers, a proposed federal rule from February 26 could affect how those relationships are evaluated under the FLSA.

The proposal shifts the analysis back to two core questions: does your business control how the work gets done, and does the worker have a genuine opportunity for profit or loss? It's more business-friendly than the 2024 approach — but it's still a proposal, not final law. Comments closed April 28, and a final rule hasn't been issued yet.

In the meantime, don't assume you're in the clear. State tests are often stricter than federal ones, and a worker who qualifies as a contractor federally could still be classified as an employee under your state's rules — triggering back wages, taxes, and benefit exposure.

Action step: Start with your longest-running contractors. Review whether they genuinely set their own hours, use their own tools, and have real profit-or-loss risk. If it's murky, tighten your documentation now.

1. Religious Accommodation Is an Active EEOC Priority

Two recent EEOC actions — a $5.5M sex discrimination resolution with Central Transport and a $325K religious discrimination settlement with Northwestern Medicine — signal that accommodation failures are squarely in the agency's crosshairs. When an employee raises a religious accommodation request, the safe first move is a good-faith conversation, not an immediate no.

2. June Is Your Mid-Year Compliance Checkpoint

Many state employment law changes take effect July 1, not January 1. Before June payroll closes, check for updates in every state where your employees work — wage notices, workplace posters, and exempt salary thresholds are the usual suspects. California and Illinois are especially active this year.

3. Background Check Rules Are Tightening

Several states are adding new restrictions on when and how employers can use background checks in hiring. If your process hasn't been reviewed recently — especially if you hire across multiple states — now is a good time to check.

✅ Review your longest-running contractor relationships against the economic reality test — document everything

✅ Train managers to acknowledge and discuss religious accommodation requests rather than deny them outright

✅ Check for July 1 state law changes in every state where you have employees

✅ Audit your background check workflow for any new state-specific restrictions

The DOL's PAID Program lets employers self-report wage and overtime errors and resolve them voluntarily — often with less exposure than a formal investigation. Free to use: dol.gov/agencies/whd/paid

That's it for this week. Short, actionable, no fluff.

If this was useful, forward it to another small business owner who could use it.

See you next Tuesday.

The Compliance Brief thecompliancebriefhq.com

This is for informational purposes only and does not constitute legal advice.