Independent Contractor Misclassification and Compliance News May 2025

As the independent workforce continues to grow, so do the issues of worker compliance and misclassification. It is important for enterprises to remain informed about the latest laws, regulations, and developments surrounding these topics. Each month, we bring you the latest news stories from around the web.

1. United States Department of Labor Will Not Enforce 2024 Independent Contractor Rule

On May 1, 2025, the United States Department of Labor (DOL) issued a Field Service Bulletin, which announced that it would not apply the rule issued in 2024 by the Biden DOL (the “2024 Rule”). The Biden DOL, like the rule issued by the first Trump DOL, outlined the framework for determining whether workers were employees or independent contractors under the Fair Labor Standards Act (FLSA). In its announcement, the DOL said that it would use Fact Sheet #13 (July 2008) to enforce the FLSA.

This action by the DOL is one more step in a long line of back and forth between administrations. In 2015, the Obama DOL issued Administrator’s Interpretation 2015-1: The Application of the Fair Labor Standards Act’s “Suffer or Permit” Standard in the Identification of Employees Who Are Misclassified as Independent Contractors (the Administrator’s Interpretation). The Administrator’s Interpretation was not a regulation, but set forth the DOL’s interpretation of the FLSA and case law relating to classifying workers.

The first Trump DOL rescinded the Administrator’s Interpretation and followed the rule-making process to develop and issue its own independent contractor rule on January 7, 2021, days before Biden was inaugurated. The Biden DOL postponed and withdrew the rule, and the withdrawal was challenged in court. The Biden DOL issued its own rule which became effective in March 2024 (the “2024 Rule”). The DOL has now said that it won’t apply the 2024 Rule.

While the whipsaw between administrations is interesting, it may make little practical difference. The DOL consistently states that the standard is the economic realities test and that a worker is an independent contractor, as distinguished from an employee, if the worker as a matter of economic reality is in business for themself. The Administrator’s Interpretation, the first Trump DOL rule, and the 2024 Rule all agree on this. The differences arise in what factors determine whether workers are, as a matter of economic reality, in business for themselves.

2. DOL Reissues Opinion Letter for Virtual Marketplace Companies

In its Field Service Bulletin, the DOL also reissued Opinion Letter FLSA2019-6 which was initially issued in 2019, but was withdrawn in 2021. This Opinion Letter concluded that service providers who engaged through a virtual marketplace company were independent contractors. A virtual marketplace company is a company that uses a smartphone or the internet to connect consumers with service providers who may provide a wide variety of services, such as transportation, delivery, shopping, and other household services. The DOL considered six factors from Supreme Court decisions:

1. The nature and degree of the potential employer’s control;
2. The permanency of the worker’s relationship with the potential employer;
3. The amount of the worker’s investment in facilities, equipment, or helpers;
4. The amount of skill, initiative, judgment, or foresight required for the worker’s services;
5. The worker’s opportunities for profit or loss; and
6. The extent of integration of the worker’s services into the potential employer’s business.

Based on it analysis of these factors, the DOL concluded that the service providers who were engaged through a virtual marketplace company were independent contractors.

The DOL’s reinstating this Opinion Letter is consistent with its announcement that it would not apply the 2024 Rule. The DOL is more likely to conclude that a worker is an independent contractor than the Biden DOL. However, courts are not bound by the DOL’s approach or Opinion Letter and companies who engage independent contractors should still do a careful review to properly classify workers.

For more information, check out our resources page on misclassification and compliance. If you have any questions about engagement, classification, or management of your independent workforce, we’re always here to help.