New England Biz Law Update
The U.S. Department of Labor (DOL) has instructed its field staff to cease enforcement of the Biden-era independent contractor rule that took effect in March 2024.
According to a Field Assistance Bulletin issued May 1, 2025, the agency’s Wage and Hour Division (WHD) will not apply the 2024 rule while the DOL reevaluates.
The move signals a significant shift in federal labor policy regarding worker classification under the Fair Labor Standards Act (FLSA).
Background
The 2024 rule, introduced by the Biden administration, aimed to make it more difficult for businesses to classify workers as independent contractors by implementing a “totality-of-the-circumstances” framework. This framework utilized six non-exhaustive factors, including investments by the worker and employer, degree of permanence in the work relationship, and the extent to which the work performed is a core part of the employer’s business.
Business groups and freelancers were quick to challenge the 2024 rule, with several lawsuits still pending. The DOL has reportedly sought to pause some of this litigation while it reconsiders the rule.
Latest direction
While the 2024 rule is being reviewed, DOL investigators have been directed to revert to a July 2008 fact sheet and a reinstated 2019 Opinion Letter for FLSA enforcement matters where no payments for back pay or civil monetary penalties have yet been made.
The older guidance generally applies an “economic realities” test that emphasizes two main factors: the worker’s control over their work and their opportunity for profit or loss. The test is generally seen as providing businesses with more flexibility in classifying workers as independent contractors.
Notes and reminders
The DOL’s announcement clarifies that the 2024 independent contractor rule “remains in effect for purposes of private litigation.” Businesses could still face lawsuits from individuals claiming misclassification under this rule.
The DOL’s guidance applies only to the federal FLSA. Many states have their own, often stricter, tests for independent contractor status (such as the “ABC test” used in California and New Jersey). Businesses must continue to comply with all applicable state and local laws.
Going forward
Industry observers anticipate the DOL will eventually rescind the 2024 rule and propose a new rule, likely aligning more closely with the “economic realities” test favored during the previous Trump administration.
While this shift in federal enforcement offers some relief to businesses, particularly those reliant on freelancers or the gig economy, caution is advised given the fluctuating regulatory environment and the differences between federal and state laws.
