New U.S. DOL Guidance on Independent Contractor vs. Employee Analysis
On May 1, 2025, the U.S. Department of Labor (“U.S. DOL”) Wage & Hour Division issued a field assistance bulletin (“FAB”) to guide investigators on determining independent contractor vs. employee status when enforcing the Fair Labor Standards Act (“FLSA”).
The FAB directs investigators to not apply the 2024 Biden-era independent contractor rule in current enforcement matters while the U.S. DOL reconsiders the 2024 Rule.
Instead, investigators are directed to enforce the FLSA using Fact Sheet #13 (July 2008) and Opinion Letter FLSA2019-6 as guideposts for new or ongoing enforcement matters (in which no payments of back wages and/or civil money penalties have been made yet) as of May 1, 2025. Under U.S. Supreme Court precedent (as distilled by these resources), the following factors are considered significant in analyzing worker classification:
- The nature and degree of the potential employer’s control;
- The permanency of the worker’s relationship with the potential employer;
- The amount of the worker’s investment in facilities, equipment, or helpers;
- The amount of skill, initiative, judgment, or foresight required for the worker’s services;
- The worker’s opportunities for profit or loss; and
- The extent of integration of the worker’s services into the potential employer’s business.
Also included in the analysis of these factors is the worker’s degree of independent organization and operation.
The U.S. DOL further indicated it is considering rescinding and/or replacing the 2024 independent contractor rule and developing alternate standards for determining independent contractor vs. employee status under the FLSA.
The FAB supersedes any contrary or conflicting guidance that has been issued to investigators on this subject.
Background on the 2024 Independent Contractor Rule
The 2024 Biden-era rule, originally effective March 11, 2024 and subject to multiple court challenges since then, identified at least six factors for determination of whether an individual is an employee or an independent contractor under the FLSA. The analysis focused on a totality-of-the-circumstances “economic reality” test, under which no factor or set of factors held more weight than the others and was generally considered employee-friendly.
Impact on Employers
Notably, the new FAB acknowledges that the 2024 independent contractor rule remains in effect for private litigation purposes. That means individual or collective actions brought by workers alleging misclassification can still use the 2024 independent contractor rule to guide the analysis of their claims.
In light of the FAB, employers should revisit their classification of contract labor to determine whether any changes need to be made to the underlying relationship or the agreement memorializing the same.
The Brooks Pierce Labor & Employment Team is monitoring for developments, including potential rescission of the 2024 independent contractor rule and issuance of a new proposed rule.
