U.S. Department of Labor Signals Return to More Employer-Friendly Independent Contractor Rule

On May 1, 2025, the U.S. Department of Labor’s Wage and Hour Division announced it will no longer enforce the Biden Administration’s 2024 Independent Contractor Rule (2024 Rule) when applying the Fair Labor Standards Act (FLSA). Instead, the agency will revert to the more employer-friendly approach used during the first Trump Administration.

The 2024 Rule, still technically in effect, applies a six-factor “totality of the circumstances” test that generally favors employee classification. In contrast, the Trump-era standard prioritized two core factors: a worker’s opportunity for profit or loss and the degree of control over their work. The new guidance confirms the USDOL will now apply the more lenient seven-factor test from its 2008 Fact Sheet #13, which includes the six factors from the 2024 Rule, with the addition of a seventh: the degree of independent business organization and operation.

Considerations for Employers: While the USDOL shifts its enforcement approach, the 2024 Rule remains legally binding unless formally rescinded—meaning courts may still apply it in active cases. Employers must also navigate varying state laws, such as New York’s detailed industry-specific tests and California’s strict “ABC” test. Classification must meet both federal and state standards. Although pending federal legislation aims to simplify worker classification and expand benefits for contractors, its future is uncertain.

To learn more about the USDOL’s updated guidance on independent contractor classification, read our latest Client Alert below.