On May 1, 2025, the U.S. Department of Labor’s Wage and Hour Division (“DOL”) issued a field assistance bulletin on “how to determine employee or independent contractor status,” effectively pausing the implementation of its 2024 final rule, Employee or Independent Contractor Classification Under the Fair Labor Standards Act (the “2024 Rule”). As the DOL reviews the 2024 Rule, its investigators are directed to no longer apply the 2024 Rule’s analysis in Fair Labor Standards Act (FLSA) investigations. Instead, DOL investigators are directed to use the pre-2024 multifactor “economic reality” test to determine whether a worker is economically dependent on a business. The pre-2024 guidance is outlined in Fact Sheet #13 and Opinion Letter FLSA2019-6, which clarifies the definition of independent contractors working for a virtual marketplace employer.
The pause in the 2024 Rule’s enforcement is expected to reduce the regulatory burden on employers nationwide. Still, suspending the 2024 Rule is not a recission, and employers should continue to monitor the status of the 2024 Rule as the Trump administration continues its efforts to roll back Biden-era regulations and comply with state law on the question of classification.
Biden-Era 2024 Rule
In 2024, the Biden DOL redefined how organizations label independent contractors. The new guidelines were designed to expand protections to workers the administration believed were being improperly identified and deprived of employee benefits. To enforce these stricter standards, the DOL adopted a “totality-of-circumstances” framework to the FLSA. This required considering six non-exhaustive factors to evaluate the relationship between a potential employer and a worker:
- Worker’s opportunity for profit or loss.
- Investments made by the worker and the employer.
- Degree of permanence of the work relationship.
- Nature and degree of control over the performance of the work.
- Extent to which the work performed is an integral part of the employer’s business.
- Use of the worker’s skill and initiative.
These changes in the 2024 Rule, which took effect in March 2024, drew legal challenges. While attempts at injunctions were unsuccessful in front of federal judges, one case, Frisard’s Transportation, L.L.C. v. LABR, has worked its way up to the U.S. Fifth Circuit Court of Appeals.
Trump Rules Return
With the suspension of enforcement of the 2024 Rules, DOL investigators are directed to apply the rules that were in effect prior to the 2024 Rule. The pre-2024 rules, some of which go back to the Bush White House, vary drastically from the 2024 guidance.
Unlike the 2024 Rule, the “economic realities” test under prior guidance only considers two factors: the nature and degree of a worker’s control and the worker’s profit-or-loss opportunity. It also accounts for three “additional guideposts.” The Biden DOL expanded this rule to include the six factors set out in the 2024 Rule.
Next Steps
Notably, the Trump administration did not fully rescind the 2024 Rule, and it is still in effect for purposes of civil litigation. This seems to be an effort to let the courts overturn the 2024 Rule, preventing the DOL under a different president from restoring it.
This action by DOL represents an expected step to reduce the burden on many industries, and the department will likely continue to scale back Biden-era labor regulations. Businesses should be mindful to continue to comply with applicable state and local classification law, which may diverge from federal law. Brownstein will monitor impactful labor decisions as they occur.
