In recent years, the U.S. Department of Labor has regulated who is an independent contractor and who is an employee for purposes of the Fair Labor Standards Act. The substance of the regulations has whipsawed based on who was in the White House at the time.
The Trump Administration has now whipsawed again – in a way that businesses may appreciate.
Background
On January 7, 2021, the DOL under the first Trump Administration issued new regulations providing guidance on determining whether a worker was an independent contractor. Under the 2021 regulations, five factors would be considered in making the determination. Two were “core” factors, and the other three might or might not be determinative. The core factors were the nature and degree of control over the work, and the workers’ opportunity for profit and loss.
In February 2021, after President Joe Biden was inaugurated, the DOL proposed to delay the effective date of the Trump rule. Then, in May 2021, the Biden DOL issued final regulations withdrawing the Trump rule.
That same month, a number of business groups sued the DOL, contending that the withdrawal did not comply with the requirements of the Administrative Procedure Act, and in March 2022 a federal judge in Texas found in their favor. The DOL appealed but then issued a new proposed rule in October 2022. A final rule was issued in January 2024.
The Biden rule had a standard that made it more likely that a given worker would be found to be an “employee” rather than an independent contractor.
Business groups immediately challenged the 2024 final rule in court. But once President Trump returned to the White House this past January, the DOL has sought to put all of that litigation on hold while it reconsiders the independent contractor standard, including whether to rescind the 2024 rule altogether.
Current DOL position
Last week, the DOL published Field Assistance Bulletin No. 2025-1, titled “FLSA Independent Contractor Misclassification Enforcement Guidance.” The bulletin provides guidance to field staff of the DOL’s Wage Hour Division on whether a worker is an employee or an independent contractor for purposes of enforcing the FLSA.
The DOL acknowledges the many legal challenges to the Biden Administration’s 2024 rule and says that it has taken the position in those lawsuits that it is reconsidering the 2024 rule, including whether to rescind it.
The DOL will no longer apply the 2024 rule when determining whether a worker is an independent contractor or an employee. However, the 2024 rule remains in effect for now, and would still be controlling in private FLSA litigation.
As far as the government’s position is concerned, the DOL has said that it will enforce the FLSA in accordance with Fact Sheet 13, which was originally issued in 2008, and Opinion Letter FLSA 2019-6, which has been reinstated as Opinion Letter FLSA 2025-2.
Fact Sheet 13 provides that the following criteria will be reviewed in making the independent contractor/employee determination:
- The extent to which the services rendered are an integral part of the business.
- The permanency of the relationship.
- The amount of the worker’s investment in facilities and equipment.
- The nature and degree of control by the business.
- The worker'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 worker.
Opinion Letter FLSA 2025-2 applied the May 1 standards to a virtual marketplace company and determined that service providers for that company are independent contractors and not employees.
Conclusion
We will continue to monitor these developments and provide further updates and analysis as they become available. Also, please be aware that state laws may have requirements and standards that are different from those that apply under federal law. If you need guidance, please contact any member of Constangy’s Wage and Hour Practice Group, or any Constangy attorney in the state where your business operates.