May 01, 2025
Are You My Employer? U.S. DOL Changes Independent Contractor Classification Rule (Again)
On May 1st the U.S. Department of Labor’s (DOL) Wage and Hour Division announced it is no longer applying the 2024 Independent Contractor (IC) Rule when determining employee versus independent contractor status in Fair Labor Standards Act (FLSA) investigations. Instead, the DOL will enforce the FLSA in accordance with the rule from 2008, described in Fact Sheet #13, the first of this Administration. In the interim, the DOL will decide what action it will take regarding the 2024 Rule, including whether to rescind that rule.
What does this mean for employers? The DOL describes it as providing “greater clarity for businesses and workers navigating modern work arrangements while legal and regulatory questions are resolved.” The 2008 applies a relaxed standard. It applies a six-factor test to determine whether a worker is an employee under the FLSA or an independent contractor in business for oneself:
- opportunity for profit or loss depending on managerial skill;
- investments by the worker and the employer;
- permanence of the work relationship;
- nature and degree of control;
- whether the work performed is integral to the employer’s business; and
- skill and initiative.
Under the 2024 rule, for example, a worker could be considered an employee instead an IC if – related to factor #4 – the would-be employer had the authority to exert control over the worker, even if such control was never exercised.
NOTE 1: The DOL’s Field Assistance Bulleting (FAB) reminds us that while the DOL will not be applying the 2024 rule in its enforcement for the FLSA, that rule remains in effect for private litigation.
NOTE 2: I appreciate the reminder in Fact Sheet #13, “agreeing verbally or in writing to be classified as an independent contractor—including by signing an independent contractor agreement—does not make a worker an independent contractor under the FLSA.” Remember, an individual cannot waive his or her right under the FLSA. The fact that a worker has signed an agreement with you agreeing they are an independent contractor, does not negate or outweigh the factors listed above.
NOTE 3: The next day, on May 3, 2025, the DOL issued a new Opinion Letter on this same topic, reverting to its 2019 opinion on this matter.
Talk to your company’s legal counsel when engaging the services of an independent contractor. You need to consider state rules, many of which are stricter than the DOL guidance.
