On May 1, the U.S. Department of Labor (DOL) issued a Field Assistance Bulletin announcing that the Wage and Hour Division (WHD) will no longer enforce the 2024 independent contractor Final Rule previously established by the Biden administration for purposes of complying with the Fair Labor Standards Act (FLSA). 

Field Assistance Bulletin

As we discussed here, the Biden administration issued a Final Rule effective March 11, 2024, which set forth a six-factor “totality of the circumstances” framework for determining whether a worker is properly classified as an employee or an independent contractor under the FLSA. The WHD’s newly issued Field Assistance Bulletin, titled FLSA Independent Contractor Misclassification Enforcement Guidance, announces a departure from the 2024 Final Rule.

While the DOL has not officially rescinded the 2024 Final Rule, the DOL has stated that it “will no longer apply the 2024 Rule’s analysis when determining employee versus independent contractor status in FLSA investigations.”  Instead, DOL WHD investigators are directed to enforce the FLSA in accordance with the longstanding framework set forth in Fact Sheet #13 (first published in July 2008), as further informed by Opinion Letter FLSA2019-6, addressing independent contractor status in the gig economy.

Fact Sheet #13

Fact Sheet #13, much like the 2024 Final Rule, outlines a set of non-exhaustive factors based on the “economic reality” of the relationship between the entity and the worker. These factors include:

• The extent to which the services rendered are an integral part of the principal’s business.
• The permanence of the relationship.
• The amount of the alleged contractor’s investment in facilities and equipment.
• The nature and degree of control by the principal.
• The alleged contractor’s opportunities for profit and loss.
• The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor.
• The degree of independent business organization and operation.

Notably, the revised Fact Sheet #13 does not include the 2024 Final Rule’s caveat allowing for other facts to be considered beyond the enumerated factors, which made it more challenging for businesses seeking clear criteria when making classification decisions. 

Reinstated Opinion Letter FLSA2019-6

Opinion Letter FLSA2019-6, which was previously withdrawn on February 19, 2021, has been revived by the DOL.  The DOL has reproduced the verbatim original text of the 2019 letter in what is now designated as Opinion Letter FLSA2025-2 (issued on May 2).  This Opinion Letter addresses whether service providers working in a “Virtual Marketplace Company” (VMC) are independent contractors or employees.

The Opinion Letter opines that service providers for VMCs are likely independent contractors to the extent the virtual marketplace platform is structured similarly to the one referenced in the opinion letter, which evaluated an online or app-based referral service connecting service providers to end consumers. In other words, under the Opinion Letter guidance, a worker providing services for a consumer with whom they matched on a referral platform may, generally, be properly classified as independent contractors under the test set forth in Fact Sheet #13.

Takeaways

The DOL has made it clear that it is still evaluating an appropriate standard for determining FLSA employee versus independent contractor status. We anticipate that the Trump administration will revert back to a more business-friendly two “core factor” test:

• The nature and degree of control over the work.
• The workers’ opportunity for profit or loss based on initiative and/or investments, previously discussed here. 

In the meantime, businesses should evaluate their workforce for compliance with Fact Sheet #13, but with the understanding that the DOL has made it clear that the 2024 Final Rule remains in effect “for purposes of private litigation.”  Businesses should also continue to evaluate their worker classifications under more stringent state and local rules, which may differ from these federal standards. 

If you have questions about how the DOL’s updated enforcement guidance may affect your worker classification practices or need assistance navigating federal, state, or local compliance, please contact the authors.