On May 1, 2025, the United States Department of Labor (“DOL”) published the first Field Assistance Bulletin of the year providing guidance to Wage and Hour Division (“WHD”) field staff regarding the proper analysis to apply when evaluating employee and independent contractor designations. Importantly, the DOL explains WHD investigators will no longer apply the Biden Administration’s 2024 Final Rule when determining worker status in administrative investigations.
Under the Fair Labor Standards Act (“FLSA”), a worker is entitled to minimum wage and overtime pay protections when there is an actual employment relationship. The DOL has traditionally recognized several factors when considering whether an employment relationship exists for enforcement, including: 1) the nature and degree of control over the work being performed; 2) the integrality of the work in a business; 3) the permanence of the working relationship; 4) the opportunity for profit or loss; 5) any investments by the worker and business; and 6) any specialized skills in performing the work.
The proper analysis of these factors has shifted with each change in recent administrations. During the first Trump Administration, the DOL implemented the 2021 Rule giving greater weight to the “core factors” of degree of control and opportunity for profit or loss, with the others being marginally considered. The DOL explained that those two factors deserved greater weight because they were more indicative of the “economic realities” between the worker and the entity receiving the worker’s services. However, in 2024, the DOL announced a robust new rule returning to a “totality of the circumstances” approach, where all six factors were considered equally with no one factor being more probative than the others.
Now, pursuant to the May 1 Bulletin, WHD will enforce the FLSA in accordance with “longstanding principles” outlined in agency guidance predating both the 2021 and 2024 Rules. WHD staff will rely on Fact Sheet #13 (July 2008), and the analysis and guidance set forth in the DOL’s newly reinstated Opinion Letter FLSA 2019-6, to determine whether a worker is in business for themselves (and thus a contractor) or economically dependent on the hiring entity (and thus an employee). Fact Sheet #13 does not contain the detailed instruction on the application of each factor, which had the effect of tipping the scale in favor of an employee classification under the 2024 Final Rule. The Fact Sheet also outlines several factors that are immaterial in determining whether there is an employment relationship, including: 1) the place where work is performed; 2) the absence of a formal employment agreement; 3) any licensing by a state or local government; and 4) the time or mode of pay.
Employee misclassifications continue to be a major source of wage and hour liability for employers. Although the May 1 Bulletin confirms the 2024 Rule remains in effect for purposes of private litigation, the administrative reversion underscores the DOL’s shift away from the Biden-era’s employee-friendly standard and signals that formal rulemaking is likely to follow.
The employment attorneys at Poyner Spruill will continue monitoring ongoing worker classification litigation and anticipated DOL rule changes as they arise.
