In a significant shift for businesses, nonprofit organizations and gig-economy workers, the Department of Labor (DOL) Wage and Hour Division (WHD) announced on May 1st that it will no longer enforce the 2024 independent contractor rule (which outlined the framework for determining employee or independent contractor status under the federal Fair Labor Standards Act) as it works to rescind the regulation entirely. The DOL’s decision — as outlined in its Field Assistance Bulletin (FAB) No. 2025-1 — comes amid multiple ongoing lawsuits challenging the rule.
Effective immediately, WHD investigators are directed not to apply the 2024 Rule’s analysis in enforcement matters when determining employee versus independent contractor status. Instead, the DOL is reverting to “longstanding principles” from earlier guidance to assess whether a worker is an independent contractor or employee when enforcing the Fair Labor Standards Act (FLSA).
The DOL emphasized that this move provides clarity for businesses and workers navigating modern work arrangements while legal challenges continue. The 2024 Rule remains technically in effect until the formal rescission process is complete.
The now-paused 2024 rule, finalized under the Biden administration, had expanded the criteria under which workers could be classified as employees rather than independent contractors under the FLSA, resulting in more workers being considered employees. This classification matters because employees are entitled to minimum wage, overtime pay, and other legal protections, while generally, independent contractors are not.
Business groups pushed back hard against the 2024 Rule, arguing that it increased legal uncertainty, limited flexibility for those who wanted to be “gig-workers,” and drove up operational costs. The National Federation of Independent Business (NFIB), a small business advocacy organization, opposed the 2024 Rule arguing that the rule further complicated the worker classification process for small businesses, and it joined a lawsuit in Texas challenging the rule, which remains pending.
For now, companies and nonprofits should consult with their employment counsel to navigate worker classification decisions carefully as the legal landscape continues to evolve. Furthermore, employers should remain mindful that they still need to comply with their own states’ labor laws which may have their own tests for determining who is an independent contractor (and makes it more likely that a worker will be classified as an employee under state law).
