Positive news for employers: the Department of Labor (DOL) announced it will no longer enforce the 2024 Biden-era independent contractor final rule that aimed to reclassify gig workers as employees rather than independent contractors. The 2024 final rule revised the standard for determining whether a worker is an employee or an independent contractor under the Fair Labor Standards Act (FLSA), which was consistent with a broader effort by the Biden administration to ensure gig workers were afforded the same rights and protections as traditional employees.
Now, under the current Trump administration, the DOL is trying to reverse course. The 2024 final rule triggered several lawsuits that the current DOL likely wants dismissed. The pause on the 2024 final rule permits the DOL to put the lawsuits on hold while it reconsiders whether to defend or rescind the rule.
Field Assistance Bulletin and Fact Sheet #13
In the recently issued Field Assistance Bulletin 2025-1, the DOL instructed its field staff to stop using the Biden-era 2024 final rule in analyzing employment status. The 2024 final rule changed how the agency determined whether a worker is an employee or an independent contractor for purposes of federal minimum wage and overtime law. It laid out a comprehensive, six-prong "economic realities" test to determine whether workers are independent contractors, focusing on factors like the level of control a company has over the worker's activities, the relationship of the work to the business (i.e., is it integral or peripheral), and the worker's economic dependence on the company. The 2024 final rule faced immediate legal challenges by business groups arguing it unnecessarily increased costs, reduced flexibility, and created legal uncertainty. The pause of enforcement in the 2024 final rule is likely in response to the DOL navigating the five pending lawsuits that were brought against it. The Field Assistance Bulletin instead instructs the DOL field staff to analyze employment status under the long-standing framework set forth in Fact Sheet #13.
Fact Sheet #13, which was implemented in 2008, will now be used for any matters for which an employer has not paid back wages or civil money penalties as of May 1, 2025. Fact Sheet #13 identifies numerous factors courts historically have considered when determining whether an individual "is engaged in a business of his or her own" as a matter of economic reality or is dependent on the entity for which they are performing work. These factors include:
- 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
What Does This Mean for Employers?
This decision to pause enforcement is a win for employers who regularly rely on gig workers. Classifying gig workers as employees rather than independent contractors increases the number of workers entitled to protections and benefits, such as minimum wage, overtime pay, and insurance. Pausing enforcement of the 2024 final rule, however, is not a permanent measure. The Field Assistance Bulletin indicates that although the DOL will not enforce the 2024 final rule while it develops the "appropriate" independent contractor standard, the DOL "reserves its right to exercise its enforcement authority in specific matters explicitly deemed appropriate by the Administrator, or designee, as an appropriate allocation of resources."
The DOL also notably did not implement the two "core" factor independent contractor final rule published by the first Trump administration then considered most probative of independent contractor status: (1) the nature and degree of control over the work and (2) the worker's opportunity for profit or loss based on initiative or investment. That final rule, issued in early 2021, was rescinded by the Biden DOL before it even took effect. Reviving the Trump final rule today would require the DOL to undertake formal notice-and-comment rulemaking.
For employers currently engaged in litigation with claims arising under the FLSA, the 2024 final rule remains in effect "for purposes of private litigation" relating to independent contractor status, the Field Assistance Bulletin noted. Businesses also need to comply with all applicable federal, state, and local rules addressing independent contractor/employee classifications. Keep in mind that many states, such as Maryland, New York, and California, have laws making it harder for employers to assign independent contractor status to their workers.
Venable's Labor and Employment Group will continue to monitor these developments with great interest, including whether the DOL will rescind the 2024 final rule and implement a new rule. Employers with questions on this topic should reach out to the authors of this article or any other member of Venable's Labor and Employment Group.