A proposed federal rule on independent contractor classification lands against a California enforcement backdrop that was already among the most demanding in the country. Segal McCambridge’s Chelsea Zwart offers a mid-year risk-reduction agenda focused on where wage-and-hour claims most often originate.
In late February, the US Department of Labor announced a proposed rule to revise how employers distinguish between employees and independent contractors under federal wage-and-hour law. For employers already navigating California’s strict classification standards and aggressive wage-and-hour litigation environment, the proposal is a timely reminder that worker classification remains a front-door issue for audits, investigations and follow-on claims across jurisdictions.
Mid-year compliance reviews tend to fall into two buckets. Some organizations use them to confirm that policies, practices and records match. Others use them to evaluate the areas where claims and enforcement activity most often arise and then prioritize fixes based on what the review surfaces.
For employers with a California footprint, the second half of 2026 is a good time to review policies and procedures for alignment with California requirements. It’s safe to assume that California will remain the pacesetter. California wage-and-hour rules, classification standards and enforcement posture frequently serve as the operational baseline for multi-state employers because payroll systems, managers’ habits and third-party workforce models do not remain neatly separated by state lines.
This mid-year risk-reduction agenda focuses on where claims and enforcement are most likely to arise in 2026 and what leadership and compliance teams can implement now through policy updates, manager training and internal audits.
In practice, wage-and-hour disputes tend to expand quickly once they start. A meal or rest break complaint frequently brings overtime calculations, timekeeping adjustments and wage statement accuracy into the same conversation, increasing both cost and complexity.
Enforcement attention also remains concentrated in industries that rely on hourly workforces and layered labor models, including construction, logistics, janitorial, hospitality, healthcare subcontracting and car wash operations. Employers can expect continued scrutiny from the California Division of Labor Standards Enforcement (DLSE) and parallel pressure through private litigation.
Leadership-level actions to take now
Start with the timekeeping and pay practices that most often generate stacked claims. Review rounding rules, meal and rest exception handling and the controls around time edits, including who can make changes and how those changes are documented. Then, validate wage statement accuracy using real samples across pay types and departments. Finally, use meal and rest premium trends as an operational signal. Persistent premiums in specific teams or locations often point to scheduling, staffing or manager practices that can create broader exposure.
Misclassification and joint-employer theories remain a fast path to multi-agency scrutiny. Worker classification and payroll tax enforcement also remain closely linked in California. Employers that use independent contractors, staffing vendors or subcontractors should assume that one audit can quickly trigger another. The operational issue is control. When a business directs schedules, performance standards, tools or day-to-day work, agencies and plaintiffs will argue that there is an employment relationship or joint responsibility, even if payroll sits elsewhere.
Multi-state leaders should also remember that California is not alone in taking wage theft and compliance enforcement seriously. New York continues to emphasize wage theft enforcement and has highlighted data-driven tools and expanded collection authority, including the use of dashboards and new enforcement mechanisms. The New York State Department of Labor’s wage theft hub provides a helpful snapshot of those initiatives. New York’s 2025 enforcement recoveries and wage theft figures were also summarized in a statewide release here.
A compliance signal to watch outside California is the rise of structured monitoring and reporting requirements as part of wage resolutions. Illinois, for example, announced an assurance of voluntary compliance requiring enhanced monitoring and reporting after wage complaints, along with penalties paid to a wage theft enforcement fund.
Identify where your workforce model creates shared responsibility risk. Map roles supported by contractors, staffing agencies or subcontractors and document who sets schedules, directs work and evaluates performance. Evaluate vendor controls by reviewing contracts for audit rights, record access, compliance obligations and clear escalation paths when wage issues arise. Revisit classification decisions annually and whenever roles change, confirming the business rationale and supporting documentation and updating decisions when supervision, duties or operational control have drifted.
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In many investigations and lawsuits, the core narrative comes from routine decisions made by frontline leaders, such as discouraging breaks during peak periods, allowing “quick” off-the-clock tasks or handling complaints inconsistently.
A mid-year review should treat manager capability as a control that can be tested and improved. That approach supports defensibility because it creates a record of expectations, reinforcement and follow-through.
Run scenario-based manager training. Focus on break timing, overtime authorization, time record corrections and how to respond to complaints without creating retaliation risk. Standardize documentation expectations. Require managers to consistently document schedule changes, missed-break remediation steps and corrective coaching. Review discipline consistency. Inconsistent enforcement of timekeeping or attendance expectations is frequently used to argue pretext in retaliation and discrimination claims.
Remote and hybrid work needs clearer operational boundaries
Remote work has become a compliance strain point. Timekeeping disputes often start when employees feel workload expectations require after-hours responsiveness. At the same time, some monitoring tools can raise privacy and trust concerns if not deployed carefully.
Clarify after-hours expectations. Define what “responsive” means, who can authorize overtime and how employees should record work performed outside scheduled hours. Reinforce meal and rest procedures for remote workers. Provide practical guidance for interrupted breaks and the method for reporting exceptions. If monitoring tools are used, align governance. Confirm disclosures, access controls, retention and a defensible business purpose for the tool and the data it collects.
A mid-year risk check that fits executive and compliance workflows
A useful mid-year deliverable is a one-page risk map that connects the highest-probability risks to concrete controls and proof points. This prevents compliance from becoming a collection of disconnected initiatives. For the remainder of 2026, the most valuable audits are targeted and time-bound. They focus on data patterns and operational weak points, such as timekeeping integrity and edit controls, meal and rest exception patterns, wage statement accuracy across departments and contractor and vendor oversight practices.
Multi-state employers can take a practical approach. Use California as the strictest operational benchmark, then validate where other states add requirements or enforcement mechanisms. This approach reduces complexity and strengthens defensibility when issues arise.
A disciplined mid-year review can reduce exposure before year-end by aligning policies with day-to-day operations, training managers as compliance controls and auditing areas where issues tend to recur. For leadership teams, the payoff is fewer surprises, better documentation and a clearer story to tell regulators, plaintiffs and the board.
Chelsea Zwart is an employment litigation shareholder at Segal McCambridge. 
