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DOL Proposes New Independent Contractor Rule Under FLSA

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DOL Proposes New Independent Contractor Rule Under FLSA
According to a White House Office of Management and Budget notice, the U.S. Department of Labor (DOL) has delivered its new independent contractor rule under the Fair Labor Standards Act (FLSA). DOL previously identified the regulation as one to revisit in August and September 2025, but the new regulation has only surfaced now. The White House has provided no further information as to when it might publish the new rule.  The expectation is that the DOL may revert to the independent contractor or “gig worker” rule, the “economic reality” test it adopted during the first Trump administration. This test looks at two “core factors” to determine whether a worker is an employee or an independent contractor:
  • The nature of and degree of a worker’s control over the work; and
  • The worker’s potential for profit or loss is based on initiative and/or investment. 
The “economic reality” test also considers three other “less probative” factors in its analysis, as follows:
  • The amount of skill the work requires;
  • The degree of permanence of the work relationship between employer and worker; and
  • Whether the work is part of an integrated unit of production. 
However, the DOL didn’t issue the 2021 rule until near the end of the first Trump administration, so the incoming Biden administration promptly delayed it and then rescinded it. The DOL then issued a new “independent contractor” rule that used a “totality of the circumstances” approach based on multiple factors and did not emphasize any one factor over another. Despite legal challenges, the Biden-era rule went into effect in March 2024.  Predictably, when Trump returned to the White House in January 2025, DOL abandoned enforcement of the 2024 rule and stated that it would likely rescind it and revisit the issue. The only indication of what the new DOL rule may include came from a May 2025 DOL opinion letter stating that service providers for a virtual marketplace company were likely independent contractors under the FLSA. In that opinion letter, the DOL made repeated references to the concept of “economic reality” as the crux of its analysis.  HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.
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