The Department of Labor (DOL) has paused enforcement of a Biden-era rule on independent contractor status. In a bulletin posted earlier this month, the department’s Wage and Hour Division directed investigators not to apply the agency’s 2024 independent contractor rule in their enforcement of the Fair Labor Standards Act.
The rule took effect in March of 2024 and makes it more difficult for businesses to treat workers as independent contractors rather than employees. It applies the following six factors to determine whether an employee is an independent contractor:
- Opportunity for profit or loss depending on managerial skill
- Investments by the worker and the potential employers
- Degree of performance of the work relationship
- Nature and degree of control
- Extent to which the work performed is an integral part of the potential employer’s business
- Skill and initiative
The Biden administration said the rule expanded more protections for workers who were misclassified as independent contractors. Business groups who opposed the rule argued it increased costs for employers and expanded liability without basis.
Now, the 2024 rule is under review and the Trump-led DOL is considering rescinding it. However, the rule is still law – for now. The Firm recommends employers continue to comply with all applicable federal, state and local rules addressing independent contractor classifications. We also advise that companies require workers to enter into an agreement that acknowledges it is their desire to perform services as an independent contractor, among other provisions.
The information contained in this document does not constitute legal advice.