DOL Pauses Enforcement of New Independent Contractor Rule — What Employers Need to Know
As of May 1, 2025, The U.S. Department of Labor (DOL) has paused enforcement of its 2024 Independent Contractor Rule, which introduced a more detailed “economic reality” test for determining whether a worker is an employee or an independent contractor under the Fair Labor Standards Act (FLSA). Even though the rule technically remains in effect, DOL investigators have been instructed to stop applying it in active enforcement cases. Instead, the agency is reverting to earlier guidance from 2008 and 2019.
What Was the 2024 Rule?
The 2024 rule, which took effect March 11, 2024, replaced the 2021 version and outlined six key factors to evaluate whether a worker is an independent contractor:
- Whether the worker can make a profit or take a loss
- How much they’ve invested in their work
- How permanent the work relationship is
- Who controls the work
- Whether the work is central to the business
- The skill and initiative the worker brings
Unlike the prior rule, the 2024 version didn’t weigh any one factor more heavily than another. Instead, it looked at the whole picture of the working relationship.
What’s Changing Now?
The DOL is pausing enforcement of the 2024 rule while it reviews ongoing legal challenges and revisits its guidance internally. In the meantime, it will use older frameworks from 2008 and 2019, which include similar economic reality factors but with different interpretations and emphases. This change is intended to provide clarity for businesses and workers during the period of review and litigation.
What This Means for Employers
- The 2024 rule still applies in private lawsuits. It’s just not being used in DOL investigations right now.
- State laws may differ. It’s essential to check your state’s independent contractor rules.
- This change could impact how misclassification is enforced. However, businesses must still be proactive in ensuring workers are correctly classified.
Our Recommendations
- Review your workers’ classifications to ensure they comply with both federal and state standards.
- Stay updated as the standard shifts. This standard is an evolving area with potentially significant consequences.
- Talk to your legal counsel before making classification changes or entering into new independent contractor arrangements. The stakes are high, and the rules are still in motion.
Have questions? Our Labor & Employment team is here to help you navigate the current landscape and reduce your risk.
Please contact Gina Carrillo or Richard Mahrle if you would like help navigating this evolving regulatory situation.
Gina Carrillo
gcarrillo@gblaw.com
602-256-4451
Richard Mahrle
rmahrle@bglaw.com
602-256-4433
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