Update on Changes in Independent Contractor Status
As the Trump Administration begins its second term in the White House, widespread changes are being made in the administrative landscape. One such change impacts how the U.S. Department of Labor (“DOL”) will classify labor relationships under the Fair Labor Standards Act (“FLSA”).
On May 1, 2025, the U.S. Department of Labor Wage and Hour Division (“WHD”) published Field Assistance Bulletin No. 2025-1. In this Bulletin, WHD stated that it will no longer enforce the Biden Administration’s rule entitled ‘Employee or Independent Contractor Classification Under the Fair Labor Standards Act’ (“2024 Rule”). The 2024 Rule is still in effect for private litigation but will not be applied by WHD in FLSA investigations. Instead, WHD announced that while it is reviewing and developing a new standard for determining independent contractor or employee status under the FLSA, it will enforce the FLSA in accordance with the “economic reality” test set forth in Fact Sheet #13 (July 2008).
In developing Fact Sheet #13, WHD noted that the Supreme Court has considered the following significant factors in determining the classification of a labor relationship under the FLSA:
The extent to which the services rendered are an integral part of the principal’s business.
The permanency of the relationship.
The amount of the alleged contractor’s investment in facilities and equipment.
The nature and degree of control by the principal.
The alleged contractor’s opportunities for profit and loss.
The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor.
The degree of independent business organization and operation.
Although WHD stated that these “economic reality” test factors are significant, it also recognized that the Supreme Court has held that no single rule or test is applied to FLSA labor relationship classification. Instead, it is the total activity or situation that controls the classification of a labor relationship.
In Field Assistance Bulletin No. 2025-1, WHD stated that the DOL is considering rescinding the 2024 Rule in favor of a standard yet to be developed. It remains unclear when WHD could propose a new regulatory standard for labor relationships under the FLSA, or whether WHD will continue enforcement via Fact Sheet #13.
To see how WHD has applied Fact Sheet #13, please refer to Opinion Letter FLSA2025-2 (previously designated as Opinion Letter FLSA2019-6).
The author thanks Summer Legal Clerk Garrett Brewster for his helpful research and drafting assistance.