On May 1, 2025, the U.S. Department of Labor (“DOL”) released a Field Assistance Bulletin (“FAB”) to the Wage and Hour Division essentially stating that it will stop enforcing a Biden-era test used to determine the classification of independent contractors versus employees. While the guidance does not state the 2024 rule has been officially revoked, it does state that it is currently under review and outlines guidance on how the Wage and Hour Division should approach the analysis.
Background
During Trump’s final days in office in 2021, his administration released an independent contractor test that arguably simplified the factors for determining when a worker is an employee versus when a worker is an independent contractor under the Fair Labor Standards Act (“FLSA”). The focus was on whether a worker was dependent on someone else for work. As articulated by the former DOL Wage and Hour Division Administrator, Cheryl Stanton, “a worker is an independent contractor if, as a matter of economic reality, he or she is in business for him or herself as opposed to being economically dependent on an employer for work.”
The Biden administration, however, rescinded the 2021 rule and instead issued a six-factor non-exhaustive test that focused on the “economic reality” of the relationship between a worker and a potential employer. The six-factors included (1) investments made by the worker and potential employer; (2) the degree of control an employer has over the work; (3) the worker’s opportunity for profit or loss; (4) the degree of permanence of the work relationship; (5) the use of the worker’s skill and initiative and (6) the extent to which work performed is integral to the purported employer’s business. Numerous lawsuits ensued challenging the 2024 Biden-era rule. As expected, the Trump administration went to work on changing the labor and employment landscape.
The Newly Issued Guidance for Worker Classification
While the lawsuits challenging the 2024 rule are still pending, the FAB states that the DOL takes the position that it is “reconsidering the 2024 rule, including whether to rescind the regulation.” That said, the DOL Wage and Hour Division will now enforce the FLSA according to previous guidance issued in Fact Sheet #13 and a 2019 Opinion Letter (FLSA2025-2), not the 2024 rule. According to the DOL, the guidance “provides greater clarity for business and workers navigating modern work arrangements while legal and regulatory questions are resolved.” Fact Sheet #13 acknowledges that the U.S. Supreme Court has previously signified that there is no single rule/test for determining the classification of a worker, i.e., independent contractor versus employee. Rather, “it is the total activity or situation which controls.”
Other Important Considerations
Besides the newly issued guidance in the FAB, employers should also consider employment laws at the state level as well. For example, California generally uses the ABC test to determine whether a worker is an independent contractor or an employee. The ABC test considers a worker to be an employee and not an independent contractor unless all three factors are satisfied: (1) the worker is free from the employer’s control and direction regarding the performance of the work, both under the contract and in reality; (2) the worker performs work outside the employer’s usual course of business; and (3) the worker is customarily engaged in an independently established business that provides work of the same nature as the work performed. The California Labor and Workforce Development Agency offers examples of how to apply each of the three factors. However, the ABC test is not always applied, so be sure to reach out to anyone in our Los Angeles Labor & Employment Practice Group for further insight.
If you have any questions, please contact anyone in our Labor & Employment Practice Group with whom you regularly work.
