By Katherine Brustowicz, Denise Chicoine, David Gabor, Johanna Matloff, and Virginia Peabody (Senior Consultant)
The Department of Labor (DOL), through its Wage and Hour Division (WHD), issued a Field Assistance Bulletin (FAB No. 2025-1) stating that as of May 1, 2025, it will no longer apply the 2024 Biden-era independent contractor rule in its enforcement of the Fair Labor Standards Act (FLSA).
The 2024 rule set out a six-pronged “economic realities” test to determine whether a worker is an employee covered by the FLSA or an independent contractor, who is not. Overall, the Biden-era rule is pro-employee, meaning that utilizing the six-pronged test is more likely to result in a worker’s being classified as an employee. The six factors are:
1) Opportunity for profit or loss depending on managerial skill;
2) Investments by the worker and the potential employer;
3) Degree of permanence of the work relationship;
4) Nature and degree of control;
5) Extent to which the work performed is an integral part of the putative employer’s business; and
6) Skill and initiative.
The question of who qualifies as an employee under the FLSA is not new. Near the end of his first term, President Trump’s Administration released what is commonly referred to as the Trump 2021 rule. The Trump 2021 rule emphasized two factors as determinative of a worker’s status:
1) The nature and degree of the worker’s control over the work, and
2) The worker’s opportunity for profit or loss based on initiative and/or investment.
Compared to the 2024 rule, the Trump 2021 rule was seen as pro-business or pro-employer. It made it easier to classify workers as independent contractors, which generally excluded such workers from FLSA protections. By keeping things simple, it reduced uncertainty. The rule had its critics though, as many argued it tilted things too heavily in favor of businesses.
That brings us to FAB No. 2025-1, issued on May 1. Instead of continuing to uphold the 2024 rule or reverting to the Trump 2021 rule, the DOL and its WHD are reverting to enforcement based on the 2008 version of Fact Sheet #13, which outlined the following seven-factor test:
1) The extent to which the services rendered are an integral part of the principal’s business;
2) The permanency of the relationship;
3) The amount of the putative contractor’s investment in facilities and equipment;
4) The nature and degree of control by the principal;
5) The alleged contractor’s opportunities for profit or loss;
6) The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor; and
7) The degree of independent business organization and operation.
It is worth emphasizing that the 2008 framework does not invalidate the 2024 rule. The Biden-era rule remains formally in effect and may apply in private litigation. The DOL, however, will not enforce it in its investigations or when imposing penalties. In effect, the DOL is freezing enforcement of the 2024 rule.
Employers may feel more confident using independent contractors under the 2008 standard, but caution is still warranted. Several states have stricter classification tests (e.g., California’s and Massachusetts’ so-called ABC test which starts with the presumption that all workers are employees) that may expose employers to liability even if they comply with federal standards. These are pitfalls that employers should be wary of, consulting legal counsel to avoid falling into them.
If you have questions about how this enforcement shift may impact your worker classification practices, compliance obligations under the FLSA, or state law exposure, our Employment Law and Human Resources Team is here to assist. For strategic guidance and risk assessment, please contact Katherine Brustowicz, Denise Chicoine, David Gabor, Johanna Matloff, or Virginia Peabody (Senior Consultant).