Narrowing the Lens: How the 2026 Joint Employer and Independent Contractor Reclassifications Affect ERISA Fidelity Bond Underwriting

In February 2026, two significant federal regulatory actions reshaped the landscape of employer classification in the United States. The National Labor Relations Board (NLRB) formally reinstated the 2020 joint-employer standard, requiring “substantial direct and immediate control” over essential employment terms before an entity can be deemed a joint employer (National Labor Relations Board, 2026). Simultaneously, the U.S. Department of Labor (DOL) issued a Notice of Proposed Rulemaking to rescind the Biden administration’s 2024 independent contractor classification rule and restore the two-factor “economic reality” test from the first Trump administration (U.S. Department of Labor, 2026). Together, these actions carry meaningful implications for underwriters of ERISA fidelity bonds—the surety instruments required under Section 412 of the Employee Retirement Income Security Act of 1974 to protect employee benefit plans against losses from fraud or dishonesty by persons who handle plan funds (29 U.S.C. § 1112).

The Regulatory Shift: From Broad to Narrow Employer Definitions

The Biden-era NLRB joint employer rule, published in 2023, significantly expanded the circumstances under which two entities could be held jointly responsible for labor obligations. Under that standard, even indirect or contractually reserved—but unexercised—control over workers could establish joint employer status (National Labor Relations Board, 2023). A federal court vacated this rule in March 2024 because it failed to provide a meaningful two-part test and that the NLRB’s rationale for rescinding the 2020 rule was arbitrary and capricious (Chamber of Commerce v. NLRB, 2024). The NLRB’s February 2026 final rule formally codifies the reinstatement of the 2020 standard, under which joint employer status attaches only where an entity exercises substantial direct and immediate control over wages, benefits, hours, hiring, discharge, supervision, and direction (National Labor Relations Board, 2026).

On independent contractors, the DOL’s proposed rule would abandon the 2024 totality-of-the-circumstances framework (the “six factors” test) in favor of a “core factor” approach that prioritizes two elements: the nature and degree of the worker’s control over the work, and the worker’s opportunity for profit or loss based on initiative or investment (U.S. Department of Labor, 2026). The DOL characterized the 2024 rule’s principal flaw as its failure to provide effective guidance on how different factors should be weighed, expressing concern that the prior framework “could be viewed as setting a higher bar to find independent contractor status than the law requires” (U.S. Department of Labor, 2026). The proposed rule is subject to a sixty-day comment period ending April 28, 2026.

Implications for ERISA Fidelity Bond Underwriting

ERISA Section 412 mandates that every person who handles funds or other property of an employee benefit plan be covered by a fidelity bond, with coverage equal to at least ten percent of plan assets handled in the preceding year, subject to a minimum of $1,000 and a maximum of $500,000—or $1,000,000 for plans holding employer securities (29 U.S.C. § 1112; U.S. Department of Labor, n.d.). The bonding obligation extends beyond named fiduciaries to include officers, employees, and third-party service providers whose duties involve access to plan funds or decision-making authority that can give rise to a risk of loss through fraud or dishonesty (U.S. Department of Labor, n.d.). For underwriters, the scope of “persons who handle funds” is therefore directly influenced by how broadly or narrowly employer relationships are defined.

The narrowing of the joint employer standard produces several effects relevant to bond underwriting risk assessment. First, it reduces the universe of entities that may be deemed co-employers of a shared workforce, thereby limiting the number of parties whose personnel might be considered “persons who handle funds” of a jointly administered benefit plan. In industries heavily reliant on staffing agencies and contract labor—such as senior living, healthcare, and franchising—the broader 2023 standard could have substantially increased the number of entities bearing ERISA bonding obligations (American Health Care Association, 2026). The reinstated 2020 standard draws clearer boundaries, enabling underwriters to more precisely identify the principals requiring coverage.

Second, the reduced likelihood of joint-employer findings diminishes the probability that an entity will be drawn involuntarily into collective bargaining relationships and, consequently, into multiemployer plan structures. ERISA bond underwriters have historically exercised caution with multiemployer plans due to the complexities of collective bargaining agreements and diffused plan management responsibilities (SuretyOne, Inc., 2021). A regulatory environment that constrains the expansion of joint employment should modestly improve underwriter appetite for bonds in sectors adjacent to multiemployer risk.

Third, the DOL’s proposed return to the core-factor independent contractor test reduces the risk of worker reclassification from independent contractor to employee status. Because independent contractors generally do not participate in an employer’s ERISA-covered benefit plans, fewer reclassification disputes translate to fewer unanticipated increases in plan participant counts and fund balances. These are of course variables that directly affect the required bond amount. ERISA bond underwriters can therefore model plan growth with somewhat greater confidence under the proposed standard.

Caveats and Continuing Uncertainties

Despite these favorable developments, underwriters should approach the current environment with measured caution. The DOL’s proposed independent contractor rule remains in the notice-and-comment phase and has not been finalized (U.S. Department of Labor, 2026). Moreover, the DOL’s classification standard is interpretive rather than binding on federal courts, and courts have historically applied their own formulations of the economic reality test (Duane Morris LLP, 2026). This judicial independence has been reinforced by the Supreme Court’s 2024 decision in Loper Bright Enterprises, Inc. v. Raimondo, which eliminated Chevron deference to agency interpretations of ambiguous statutes (Loper Bright Enterprises, Inc. v. Raimondo, 603 U.S., 2024). State-level variation presents an additional complication.

Several states, including California, Illinois, Massachusetts, and New Jersey, impose stricter worker classification tests than any federal standard. California’s “ABC test,” for example, presumes worker-employee status unless the hiring entity demonstrates freedom from control, work outside the usual course of business, and an independently established trade (Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 2018). Federal rulemaking does not preempt these state standards. Underwriters evaluating ERISA bonds for plans with participants in strict-test jurisdictions must continue to account for the broader potential scope of employer obligations and plan participation that state law may compel.

The cyclical nature of these regulatory changes warrants structural consideration. The joint-employer and independent contractor standards have shifted with each presidential administration, and the current proposals are no exception. Underwriters should build flexibility into risk models and policy terms rather than treating the 2026 standards as a permanent settlement of these issues.

The February 2026 regulatory actions by the NLRB and DOL represent a meaningful contraction in the scope of joint employer liability and a move toward a more permissive independent contractor classification standard. For ERISA fidelity bond underwriters, the practical effect is a more clearly delineated universe of bonded parties, reduced exposure to involuntary multiemployer plan entanglements, and greater predictability in modeling plan fund growth driven by participant counts. These are favorable conditions for risk assessment and pricing. However, the incomplete finalization of the independent contractor rule, the post-Loper Bright diminishment of agency deference, persistent state-level variation, and the demonstrated volatility of these standards across administrations all counsel against complacency. Prudent underwriting will account for both the current regulatory tailwind and the structural uncertainty that accompanies it. Follow our blog to stay up to date with ERISA matters that affect ERISA fidelity bond underwriting and fiduciary insurance coverages.

~ C. Constantin Poindexter, MA, JD, CPCU, AFSB, ASLI, ARe, AINS, AIS, CPLP

References

  • American Health Care Association. (2026). NLRB and DOL release joint employment and independent contractor classification rules. AHCA/NCAL Blog. https://www.ahcancal.org/News-and-Communications/Blog/Pages/National-Labor-Relations-Board-Withdraws-Biden-Era-Joint-Employer-Rule–.aspx
  • Chamber of Commerce of the United States v. National Labor Relations Board, No. 6:23-cv-00553 (E.D. Tex. Mar. 8, 2024).
  • Duane Morris LLP. (2026, March). Back to the future: DOL and NLRB hit rewind on worker classification and joint employer standards. Duane Morris Alerts. https://www.duanemorris.com/alerts/back_future_dol_nlrb_hit_rewind_worker_classification_joint_employer_standards_0326.html
  • Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903 (2018). Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1112 (2024). Loper Bright Enterprises, Inc. v. Raimondo, 603 U.S. (2024).
  • National Labor Relations Board. (2023). Joint employer status under the National Labor Relations Act, 88 Fed. Reg. 73946.
  • National Labor Relations Board. (2026). Final rule: Joint employer status under the National Labor Relations Act, 91 Fed. Reg. (Feb. 27, 2026).
  • SuretyOne, Inc. (2021). ERISA fidelity bond for multiemployer plan structures (MEP). SuretyOne Blog. https://suretyone.com/blog/erisa-fidelity-bond-for-multiemployer-plan-structures-mep/
  • U.S. Department of Labor. (n.d.). Protect your employee benefit plan with an ERISA fidelity bond. Employee Benefits Security Administration. https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/publications/protect-your-employee-benefit-plan-with-an-erisa-fidelity-bond.pdf
  • U.S. Department of Labor. (2026). Notice of proposed rulemaking: Employee or independent contractor classification under the Fair Labor Standards Act, 91 Fed. Reg. (Feb. 26, 2026).