The Scaffold Initiative submitted this comment on the Department of Labor's proposed rule on independent contractor classification under the Fair Labor Standards Act. We support the proposed rule's return to the core-factor framework but address a significant gap: the proposed rule is entirely silent on how AI-driven tools affect the classification analysis. We distinguish between worker-initiated AI tool use — which supports independent contractor status as an exercise of entrepreneurial initiative — and platform-imposed algorithmic management — which constitutes employer control and supports employee status. We recommend AI-specific guidance in the control core factor, a clear distinction between worker-initiated and platform-imposed AI use, and recognition of AI literacy as a component of skill and initiative.
SUBJECT: Public Comment on 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
Submitted by: The Scaffold Initiative | thescaffoldinitiative.org | policy@thescaffoldinitiative.org
Submitted to: Division of Regulations, Legislation, and Interpretation, Wage and Hour Division, U.S. Department of Labor, Room S-3502, 200 Constitution Avenue NW, Washington, DC 20210
Date: April 1, 2026
Re: RIN 1235-AA46, Docket No. WHD-2026-0001
Dear Administrator Robb:
The Scaffold Initiative respectfully submits this comment in response to the proposed rule published at 91 FR 9932 on February 27, 2026, regarding the classification of workers as employees or independent contractors.
The Scaffold Initiative is a Wyoming 501(c)(4) social welfare organization (EIN 41-4911679) dedicated to AI literacy and workforce development for sole proprietors, freelancers, and independent workers in underserved communities. We serve the more than 28 million sole proprietors in the United States, with a focus on helping independent workers integrate artificial intelligence tools into their business operations.
We support the proposed rule's return to the core-factor framework and its elevation of control and opportunity for profit or loss as the most probative indicators of classification status. We write to address a significant gap: the proposed rule is entirely silent on how AI-driven tools affect the classification analysis, despite the fact that algorithmic management has fundamentally altered the nature of control in modern work arrangements.
The proposed rule's two core factors — the nature and degree of the worker's control over the work, and the worker's opportunity for profit or loss — were developed from case law originating in 1947. They remain sound analytical tools. But the proposed rule applies these factors without acknowledging that artificial intelligence has transformed how control is exercised and how opportunity is mediated in the modern economy.
Consider two sole proprietors:
Worker A uses AI tools she selected and pays for — an AI bookkeeping service, an AI marketing assistant, an AI scheduling tool — to run her independent consulting business. She chose these tools. She controls their configuration. She can switch to competitors at any time. Her use of AI is an exercise of entrepreneurial initiative — precisely the kind of “managerial skill, business acumen, or judgment” that the proposed rule's opportunity-for-profit-or-loss core factor identifies as indicative of independent contractor status.
Worker B performs tasks assigned by a platform that uses AI to determine which tasks she receives, when she must complete them, how her performance is evaluated, and what she is paid. The platform calls her an independent contractor. But the AI system exercises granular, real-time control over her work that no human supervisor could match — control that the proposed rule's first core factor identifies as indicative of employee status.
The proposed rule provides no guidance for distinguishing between these two scenarios. Both workers use AI tools in their work. One is exercising independence; the other is subject to algorithmic control. The economic reality test should account for this distinction.
Sara Horowitz, founder of Freelancers Union and author of Mutualism: Building the Next Economy from the Ground Up, has documented how America's independent workforce — now exceeding 64 million workers contributing over $1.27 trillion to the economy annually — is building a new economic model that does not fit neatly into the employee-employer binary.1 The Freelancers Union's research, including the multi-year “Freelancing in America” survey series, demonstrates that the vast majority of independent workers choose self-employment and consider it a career, not a stopgap.
For these workers, AI tools are the great equalizer. A sole proprietor with an AI assistant can compete with firms that have entire departments. A freelance graphic designer using AI-powered design tools can deliver work at a speed and quality that was previously available only to agency employees. A sole proprietor tax preparer using AI-driven tax software can serve more clients with greater accuracy.
The proposed rule should clarify that a worker's voluntary adoption of AI tools to enhance their independent business operations is an exercise of entrepreneurial initiative that weighs toward independent contractor status under both core factors — it reflects control over the means of work and investment in the tools of one's trade.
The Association for Enterprise Opportunity (AEO), under the leadership of President and CEO Natalie Madeira Cofield, has testified before Congress that independent contractor status preserves the autonomy essential to microbusiness formation. In testimony titled “Unlocking Opportunity: Allowing Independent Contractors to Access Benefits,” Cofield stated that “removing the autonomy of millions of Americans to choose the flexibility enjoyed by independent contracting eliminates economic mobility opportunities and automatically constructs a significant barrier to employment as pathways to work are narrowed.”2 AEO's research report, “Self-Employment: How Independent Contractors Fuel the Growth of New and Existing Microbusinesses,” documents how IC status functions as the entry point for microbusiness development in underserved communities.3 AEO's 2026 AI Policy for Small Business Coalition further validates that sole proprietors adopting AI tools are exercising the entrepreneurial initiative that the proposed rule's framework is designed to recognize.
The AFL-CIO Technology Institute, led by Executive Director Amanda Ballantyne, has articulated the other side of this equation. The AFL-CIO's “Workers First” principles on artificial intelligence, published in October 2025, identify algorithmic management as a form of employer control that should be recognized as such: “Allowing an algorithm to secretly determine whether a worker should be hired, promoted, disciplined or fired is a recipe for discrimination and unfairness, stress and job deterioration.”4
When a platform deploys AI to:
...the platform is exercising the kind of pervasive, real-time control that the proposed rule's first core factor identifies as indicative of employment status. The fact that this control is exercised through software rather than a human supervisor does not diminish it. If anything, algorithmic control is more comprehensive than human supervision — it operates continuously, adjusts in real time, and cannot be negotiated with.
The proposed rule should clarify that algorithmic management tools deployed by the hiring entity to direct, supervise, evaluate, or discipline a worker weigh toward employee status under the control core factor, regardless of whether the worker is nominally classified as an independent contractor.
Recommendation 1: Add AI-specific guidance to the control core factor. The final rule should clarify that the control analysis must account for algorithmic management. The Department should specify that when a hiring entity uses AI systems to assign work, set schedules, evaluate performance, or determine compensation, these functions constitute control under the first core factor. Conversely, when a worker independently selects and deploys AI tools to enhance their own business operations, this constitutes entrepreneurial initiative under the second core factor.
Recommendation 2: Distinguish between worker-initiated and platform-imposed AI tool use. The final rule should establish that the relevant question is not whether AI tools are present in the work relationship, but who selected, controls, and benefits from their deployment. A worker who chooses to use AI tools is exercising independence. A worker who is required to use AI tools configured and controlled by the hiring entity is subject to control.
Recommendation 3: Recognize AI literacy as a component of skill and initiative. The proposed rule identifies skill as a secondary factor. The Department should recognize that a worker's investment in AI literacy — learning to use, configure, and integrate AI tools into their independent business — constitutes the kind of specialized skill and capital investment that supports independent contractor status. This recognition would encourage AI literacy training, which directly benefits the independent workforce.
The proposed rule's core-factor framework is sound. Its silence on AI-driven tools is a gap that will generate confusion, litigation, and harm to the 28 million sole proprietors whose livelihoods depend on clear classification standards. The Scaffold Initiative urges the Department to address this gap in the final rule by distinguishing between worker-initiated AI adoption (which supports IC status) and platform-imposed algorithmic management (which supports employee status).
The independent workforce is not disappearing. It is growing, and it is increasingly AI-enabled. Classification standards should reflect this reality.
Respectfully submitted,
Ricky Tucker
Executive Director, The Scaffold Initiative
policy@thescaffoldinitiative.org
thescaffoldinitiative.org
The proposed rule's core-factor framework for classifying workers as employees or independent contractors is entirely silent on how AI-driven tools affect the analysis. Algorithmic management has fundamentally altered the nature of control in modern work arrangements, but the proposed rule provides no guidance for distinguishing between a worker who voluntarily uses AI tools and one who is subject to platform-imposed algorithmic control.
A worker who selects, pays for, and controls their own AI tools — such as AI bookkeeping, marketing, or scheduling software — is exercising entrepreneurial initiative that supports independent contractor status. A worker whose tasks, schedules, performance evaluations, and compensation are determined by a platform's AI system is subject to employer control that supports employee status.
First, add AI-specific guidance to the control core factor so the classification analysis accounts for algorithmic management. Second, establish that the relevant question is who selected, controls, and benefits from AI tool deployment — not merely whether AI is present. Third, recognize AI literacy as a component of skill and initiative that supports independent contractor status.
Without clear guidance on AI and classification, sole proprietors who voluntarily adopt AI tools risk having their independent status challenged, while platforms that use algorithmic management to control workers can continue misclassifying employees as independent contractors. Clear AI-specific guidance protects genuine independents and properly classifies controlled workers.