Agency Updates: EEOC Narrows Federal Sector Bathroom Protections; DOL Proposes New Independent Contractor Rule

Takeaway: This week, the Equal Employment Opportunity Commission (“EEOC”) limited federal employees’ access to sex segregated facilities based on gender identity, while the U.S. Department of Labor proposed a new independent contractor rule that would replace the Biden administration’s 2024 regulation with a more employer friendly “economic reality” test. Each are discussed in more detail below.

EEOC Limits Bathroom Access Protections for Federal Employees

On February 26, 2026, the EEOC held that Title VII permits federal agencies to maintain single sex bathrooms and other “intimate spaces,” and to exclude employees—including transgender employees—from bathrooms designated for the opposite sex.

The case involved a civilian employee of the U.S. Army who was biologically male and had used male designated bathrooms for several years. After informing management that he identified as a woman, the employee requested access to female designated bathrooms and locker rooms. The Army denied the request based on a federal policy requiring that intimate spaces be designated by sex, not gender identity. The employee then filed a Title VII sex discrimination complaint.

The EEOC affirmed the Army’s dismissal of the complaint. In doing so, the Commission concluded that Title VII allows federal agencies to designate bathrooms and similar intimate facilities based on biological sex, and that doing so does not constitute unlawful sex discrimination.

The Commission emphasized several points that are likely to be relevant to employers:

• Title VII does not address bathrooms. While the Supreme Court’s decision in Bostock v. Clayton County held that employers may not fire or refuse to hire employees because they are transgender, the Court expressly stated that it was not deciding issues related to bathrooms or locker rooms. The EEOC’s position, now, appears to be that Bostock does not require access to opposite sex bathrooms.
• Men and women are not “similarly situated” in intimate spaces. The EEOC reasoned that, because of longstanding privacy concerns and biological differences, men and women are not similarly situated when it comes to bathrooms, locker rooms, and comparable spaces. As a result, separating those spaces by sex is permissible under Title VII.
• Equal treatment is the key inquiry. The EEOC stressed that the Army applied the same rule to all employees: no employee—transgender or not—was permitted to use bathrooms designated for the opposite sex. Because the policy applied evenhandedly, the EEOC concluded that it did not amount to discrimination “because of sex.”
• The decision is limited in scope. The EEOC made clear that its ruling applies only to federal agencies and does not bind federal courts. The decision also does not address issues such as pronoun usage or whether misgendering could, in other circumstances, constitute harassment.

In reaching its conclusion, the EEOC expressly rejected its 2015 decision in Lusardi v. Department of the Army, which had required federal agencies to allow transgender employees to use bathrooms corresponding to their gender identity. The EEOC characterized Lusardi’s analysis as insufficient and concluded that it failed to properly account for Title VII’s text and longstanding precedent.

DOL Proposes Replacement for 2024 Independent Contractor Rule

On February 26, 2026, the U.S. Department of Labor (“DOL”) published a proposed rule that would rescind the independent contractor regulation finalized in January 2024 and replace it with a framework largely consistent with the rule issued in January 2021. The proposal would restore a more streamlined application of the “economic reality” test used to determine whether a worker is an employee or an independent contractor.

Under the proposed rule, the central inquiry remains whether a worker is economically dependent on an employer for work or is in business for themself. The DOL would again identify two factors as most probative: the nature and degree of control over the work, and the worker’s opportunity for profit or loss based on initiative or investment. Other factors—such as the level of skill required, the permanence of the relationship, and whether the work is part of an integrated unit of production—would remain relevant, but would generally carry less weight where the two core factors point in the same direction.

The Department explained that the 2024 rule’s open ended, multifactor balancing approach created uncertainty and may have discouraged legitimate independent contractor relationships. By contrast, the proposed rule is intended to provide greater clarity and predictability by more closely aligning the regulatory framework with longstanding federal case law.

If finalized, the rule would apply not only under the Fair Labor Standards Act, but also for purposes of the Family and Medical Leave Act and the Migrant and Seasonal Agricultural Worker Protection Act, which incorporate the FLSA’s definition of employment. The DOL has invited public comment on the proposal, with comments due 60 days after publication in the Federal Register.

Considerations for Employers

These developments signal a shift in federal enforcement priorities, and highlight the need for careful policy review.

With respect to bathroom access, the EEOC’s decision is binding only on federal agencies and does not bind courts. While it does not strictly apply to private employers or state and local public employers, employers of all kinds should view the decision as a clear statement of the EEOC’s current position on the issue. Employers should continue to approach bathroom access policies—and related questions such as pronoun usage, harassment, or accommodation obligations—carefully and remain attentive to developments in this evolving area of law. Further, employers must be mindful of conflicting state law and the enforcement of the same through state agencies and courts. In Illinois, for example, the Illinois Human Rights Act expressly prohibits discrimination based on gender identity and the Department of Human Rights has issued non-regulatory guidance relating to protections for transgender employees, including the use of a restroom or locker room that corresponds with their gender identity.

The DOL’s proposed independent contractor rule reflects a potential return to a more flexible, employer friendly  approach to worker classification. If finalized, it may make it easier for employers to defend contractor relationships, including in the public sector. However, the proposal is not yet final, the prior rule technically remains in effect, and misclassification claims under state law remain unchanged. Employers should continue to evaluate contractor relationships carefully while monitoring the rulemaking process.