Employee or Independent Contractor? DOL Rule Hits Roadblock

The rule employers have used to determine if a worker is an employee or independent contractor won’t be enforced by federal regulators, for now.

In fact, the rule may be rescinded, the Department of Labor (DOL) said recently.

The DOL laid out the details in Field Assistance Bulletin No. 2025-1, released May 1, 2025.

When conducting Fair Labor Standards Act (FLSA) investigations, the DOL’s Wage and Hour Division will no longer use the analysis included in the 2024 rule to determine whether someone is an employee or independent contractor, according to the field assistance bulletin.

Rather, the Wage and Hour Division will rely on Fact Sheet 13, dated July 2008, as well as Opinion Letter FLSA2019-6, which has been renamed Opinion Letter FLSA2025-2.

Getting the classification correct is essential to avoid FLSA violations with overtime and minimum wage.

Employee or Independent Contractor Decisions

After the Biden administration passed the 2024 rule, making it more difficult for businesses to classify workers as independent contractors, lawsuits started rolling into the federal courts. Indeed, some are still pending.

The Trump administration is now reviewing and developing what it deems to be the appropriate standard for determining employee status under the FLSA. The goal will be to lessen restrictions on employers.

Returning to the 2008 version of Fact Sheet 13 means the economic realities test is back in. Under this test, seven factors are significant when determining a worker’s status: They are the:

• Extent to which the services rendered are an integral part of the principal’s business
• Permanency of the relationship
• Amount of the worker’s investment in facilities and equipment
• Nature and degree of control by the principal
• Worker’s opportunities for profit and loss
• Amount of initiative, judgment or foresight in open market competition with others, and
• Degree of independent business organization and operation.

What the Current Rule States

Technically, the Biden-era rule covering who’s an employee or independent contractor is still in effect — it’s just not being enforced.

That 2024 rule relies on the totality-of-the-circumstances analysis, which takes into account six factors, all with equal weight.

Those six factors are:

• The worker’s opportunity for profit or loss
• Investments by the worker and the company
• The degree of permanence of the work relationship
• The nature and degree of control over how the work is performed
• The extent to which the work performed is an integral part of the company’s business, and
• The worker’s skill and initiative.

As the uncertainly surrounding whether someone is an employee or independent contractor continues, we’re tracking this developing story for you.