DOL Reverts to 2008 Standard For Classifying Independent Contractors and Employees

The U.S. Department of Labor (DOL) announced on May 1, 2025 that it will no longer enforce a 2024 rule, set during the Biden administration, for determining whether an individual is an independent contractor or an employee under the Fair Labor Standards Act (FLSA). While the Biden-era rule has not been officially rescinded, the DOL is reviewing it, and likely will change the rule. For now, the department will use a standard established in 2008, set forth in this DOL Fact Sheet, found here.

The change comes while several lawsuits challenging the 2024 rule are pending, although they had been paused by the Trump-administration, following the DOL’s statement that it is reconsidering the rule and may rescind it entirely.

 The standard now in effect for agency investigations, first distributed by the DOL in 2008, focuses on the following factors, which address the economic realities of the employment relationship:

 The extent to which the services rendered are an integral part of the principal's business;

1. The permanency of the relationship;
2. The amount of the alleged contractor's investment in facilities and equipment;
3. The nature and degree of control by the principal;
4. The alleged contractor's opportunities for profit and loss;
5. The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor; and
6. The degree of independent business organization and operation.

 The guidance notes that the totality of the circumstances surrounding the employment relationship are relevant, though facts such as the place where work is performed, the absence of a formal employment agreement, or whether an alleged independent contractor is licensed by state or local government are immaterial.

 The 2008 rule was last in effect during the Biden presidency in 2021, when the DOL rescinded a Trump-era rule on independent contractors that never went into effect. It was later replaced by the 2024 rule and its six-factor test. The DOL Fact Sheet on that rule differs significantly from the 2008 rule, and so employers should review the 2008 Fact Sheet, to ensure they are in compliance.

 Nemeth Bonnette Brouwer PC will continue to monitor DOL interpretation regarding how employees and independent contractors are classified under the FLSA. Feel free to contact any of the attorneys at the firm with your questions.