The U.S. Department of Labor (DOL) recently issued a long-awaited proposed rule that would again change how businesses determine whether a worker is an employee or an independent contractor under the Fair Labor Standards Act. If finalized, the rule would rescind the 2024 framework and return to a modified version of the rule implemented during President Trump’s first term.
The 2024 rule applied a multi-factor “totality of the circumstances” test, where no single factor carried greater weight. The proposed rule moves away from that approach and instead focuses on two primary considerations:
- the nature and degree of control over the work
- the worker’s opportunity for profit or loss based on initiative or investment
Other factors, such as skill, permanence of the relationship, and whether the work is integral to the business, are still relevant but not as important. Many businesses rely heavily on independent contractors, particularly in industries like construction, media, and technology where flexibility is part of the model.
Businesses that rely on independent contractors should take a closer look at those relationships, particularly where the company controls how the work is performed or where the worker has limited ability to affect their own earnings. The rule is not yet final, but now is the time to take a closer look at existing contractor relationships. In particular:
- Do contractors actually control how they perform their work?
- Can they meaningfully increase profit through initiative or investment?
- Do real-world practices match what the contract says?
Employers should continue monitoring developments as the rule moves through the comment process and toward potential implementation. Businesses that have questions about worker classification or would like assistance reviewing contractor relationships can contact Yurus Management & Counsel for guidance.