Following its May 2025 decision to stop applying the 2024 independent contractor rule, the Wage and Hour Division of the U.S. Department of Labor (DOL) has proposed rescission of the rule.
Traditionally, the independent contractor rule applied to the Fair Labor Standards Act (FLSA). However, the DOL proposal would extend the rule’s application to the Family and Medical Leave Act (FMLA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA).
The 2024 the independent contractor rule, finalized by DOL during former President Joe Biden’s administration, analyzed six factors of equal weight: opportunity for profit or loss, investments by worker and employer, permanence of the relationship, degree of control, extent to which the work is integral to the business, and use of specialized skills. However, the current administration has made clear that it is rejecting the Biden administration’s “totality of the circumstances” approach in favor of a five-factor “economic reality” test, only slightly modified from the test adopted by the DOL during the first Trump administration.
The DOL’s chosen analytical framework gives disproportionate weight to two core factors — control over the work and opportunity for profit or loss — to distinguish whether a worker is an employee or independent contractor. The remaining three factors — the amount of skill the work requires, the degree of permanence of the work relationship, and whether the work is part of an integrated unit of production — would be relevant when the two core factors point to opposite conclusions. On the other hand, if the two core factors point to the same conclusions, then there is a “substantial likelihood” that the conclusion is accurate. In that case, the other factors enter the analysis only if relevant to a determination of the worker’s economic dependence on the employer.
Unlike the previous incarnation of the rule during the first Trump administration, the DOL would apply the same independent contractor framework under the FMLA, the MSPA, and the FLSA. Since the FMLA and MSPA already use FLSA’s definitions of employee and employer, the change would standardize regulations, a particular benefit for multistate employers.
In response, business groups have welcomed the newly proposed independent contractor rule, citing increased flexibility and reduced compliance for employers. Ultimately, the proposed rule is likely to increase the reclassification of workers as independent contractors and reduce employers’ FLSA responsibilities. In contrast, organizations representing workers’ interests and some unions have argued that the proposed rule could increase the number of workers deprived of FLSA protection, such as minimum wage and overtime pay.
Nonetheless, if the DOL finalizes the rule, federal courts will continue to apply their own version of the “economic reality” test under U.S. Supreme Court precedent. Misclassification claims are still common, as employers’ potential liability is enormous, given the remedies under state and federal law.
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