DOL Withdraws 2024 Independent Contractor Rule, Signals New Direction for FLSA Enforcement

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On May 1, 2025, the U.S. Department of Labor (DOL) issued Field Assistance Bulletin (FAB) No. 2025-1, titled “FLSA Independent Contractor Misclassification Enforcement Guidance.” In the bulletin, the DOL announced that it will no longer enforce the 2024 independent contractor rule established under the Biden administration. This decision signals a policy shift under the current administration, which is actively working to develop a new standard for determining whether a worker is classified as an employee or an independent contractor under the Fair Labor Standards Act (FLSA).

Background

In January 2024, the DOL, under the Biden administration, issued a final rule revising the standard for determining independent contractor status under the FLSA. This rule rescinded the 2021 Trump-era rule, which had applied a multifactor test but assigned greater weight to two “core factors”: (1) the nature and degree of the worker’s control over their work, and (2) the worker’s opportunity for profit or loss based on their initiative and investment. In contrast, the 2024 rule adopted a six-factor, totality-of-the-circumstances test that evaluates the economic realities of the worker’s relationship with the potential employer. The rule was designed to strengthen worker protections by making it more difficult for employers to classify workers as independent contractors rather than employees entitled to minimum wage and overtime under the FLSA.

Latest DOL Position

Although the 2024 rule remains in effect and continues to govern private litigation under the FLSA, the DOL has announced that it will no longer apply this rule in its own enforcement actions. This means that, while courts may still rely on the 2024 standard, the DOL will use a different approach when assessing worker classification for its investigations and compliance efforts.

According to the bulletin, the DOL’s enforcement approach will revert to the “economic reality” framework outlined in Fact Sheet #13, originally issued in 2008. Under this framework, the determination of whether a worker is an employee or an independent contractor is based on several factors that assess the economic dependence of the worker on the employer. The following criteria will be considered in making that determination:

1. The extent to which the services rendered are an integral part of the business.
2. The permanency of the relationship.
3. The amount of the alleged contractor’s investment in facilities and equipment.
4. The nature and degree of control by the business.
5. The alleged contractor’s degree of control by the business.
6. The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor.

Takeaways

Although the bulletin confirms that the DOL is reconsidering the current rule, it remains unclear what a revised standard will ultimately entail. In the meantime, employers should proceed with caution when making worker classification decisions. While the DOL’s recent shift suggests an intent to make it easier for businesses to classify workers as independent contractors, employers must also account for applicable state laws, which may impose stricter classification standards.

Employers should also carefully document the rationale for any independent contractor classification. This includes maintaining written contracts, outlining the degree of control over work, detailing financial arrangements, and providing evidence that the worker operates an independent business. Such documentation can be essential in the event of an audit or legal dispute.

Finally, it is important to recognize that the independent contractor standard could shift again with a change in presidential administration. Employers should stay informed and be ready to adjust their classification practices as federal standards continue to evolve.