Surging changes to workplace laws understandably have employers suffering from whiplash. Historically, employment laws have shifted when presidential administrations have changed. A May 1, 2025, announcement by the U.S. Department of Labor (DOL) about its intended approach to the classification of individuals as independent contractors is a recent example.
Background on Independent Contractors
A number of operational and economic considerations can encourage employers to classify workers who are performing services on their behalf as independent contractors rather than employees. Unlike employees, independent contractors are generally not covered by the business’s benefits plans, workers’ compensation coverage, and unemployment insurance. Typically, no withholdings—taxes or otherwise—are deducted from independent contractors’ earnings. Additionally, for purposes of the Fair Labor Standards Act (FLSA), overtime and minimum wage requirements don’t apply.
Improperly classifying an employee as an independent contractor can pose significant financial consequences and litigation risks for employers, so getting this step right is critical. Let’s look at how the standard for classifying workers has changed over the last several years and where we stand today.
Independent Contractors: 2021 to 2024
January 2021. At the end of the first Trump administration, the DOL announced new employer-friendly regulations that made it easier for businesses to classify individuals as independent contractors. The rule was set to go into effect in early March 2021.
February to May 2021. Fast-forward to just a few weeks later, and the newly inaugurated President Joe Biden quickly announced his administration’s intention to halt the implementation of the new rule. Several months later, the DOL followed through and formally withdrew the regulation.
January 2024. After much litigation, the Biden administration’s DOL issued a new rule that adopted a six-factor “economic realities” test designed to help employers analyze and determine whether individuals are truly in business for themselves and therefore independent contractors or whether they’re employees. This new rule was viewed as more “employee-friendly”—that is, it required employers to consider more workers as their employees.
Following the start of the second Trump term, employers braced themselves for another U-turn. They didn’t have to wait long.
May 1, 2025, Bulletin
On May 1, 2025, the DOL’s Wage and Hour Division (WHD) issued a field assistance bulletin signaling a return to a standard under which employers had greater freedom to treat individuals as independent contractors. First, the bulletin advises that the DOL will no longer apply the prior, more restrictive rule.
Although the January 2024 rule remains relevant in private litigation, the WHD states it will no longer use the more “employee-friendly” standard when it investigates FLSA complaints or pursues FLSA enforcement actions against employers. More importantly, the bulletin indicates the DOL is considering formally replacing the January 2024 rule with a rule that officially “green-lights” more workers’ being classified as independent contractors.
What’s Next for Employers?
We’re still in a period of transition, but going forward, it looks like businesses may have more discretion in classifying and treating workers as independent contractors. You should monitor future DOL actions and consult with counsel, as needed, when gauging whether and how to classify an individual as an employee or an independent contractor.
Charlie Plumb is an attorney in the Tulsa, Oklahoma, office of McAfee & Taft. He can be reached at charlie.plumb@mcafeetaft.com.
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