On May 1, 2025, the U.S. Department of Labor’s (DOL) Wage and Hour Division issued new guidance addressing how its investigators should determine whether a worker is properly classified as an employee or an independent contractor under the Fair Labor Standards Act (FLSA). This guidance arrives amid ongoing legal challenges to the DOL’s 2024 independent contractor rule and is both a temporary return to older classification standards for enforcement purposes and a sign of likely future DOL rulemaking to rescind and replace the 2024 rule.

Background: The 2024 Rule

Effective March 11, 2024, the 2024 rule introduced a revised six-factor “economic realities” test for classifying workers under the FLSA. The rule replaced a 2021 rule that was more favorable to businesses relying on independent contractors.

The 2024 rule made it more difficult for businesses to classify workers as independent contractors by focusing on the worker’s economic dependence on the business for which the worker performs services. In several pending lawsuits challenging the 2024 rule, the DOL has taken the position that it is reconsidering the rule.

May 1 Guidance: A Shift in Enforcement Approach

In Field Assistance Bulletin (FAB) No. 2025-1, the DOL instructed its field investigators not to apply the 2024 rule in current enforcement matters. Instead, investigators are directed to use long-standing guidance from:

• Fact Sheet #13, which outlines a traditional totality of the circumstances test based on judicial precedent; and
• Opinion Letter FLSA2019-6, which offers specific insight for classifying workers in the context of virtual marketplace platforms.

Therefore, while the 2024 rule technically remains in effect, the DOL will not apply it in investigations where no back wages or civil penalties have yet been paid, either directly to individuals or to the DOL, as of May 1, 2025.

Why This Matters

The DOL’s updated enforcement approach creates a notable gap between the law as it stands (i.e., the 2024 rule) and the agency’s enforcement practices. While private litigants may still rely on the 2024 rule, the DOL will follow prior guidance for now, providing a more flexible approach to classification.

FAB No. 2025-1 further hints at a likely future decision by the DOL to rescind the 2024 rule, stating that the DOL “is currently reviewing and developing the appropriate standard for determining FLSA employee versus independent contractor status.”

Key Takeaways for Employers

• While the 2024 rule remains in effect, it will not be applied in DOL investigations unless back wages or penalties have already been assessed.
• Private litigants may still rely on the 2024 rule, so employers may face different standards depending on who brings the claim.
• With the applicable standard for independent contractor classification under the FLSA in flux, employers using independent contractors should consult with experienced wage-and-hour counsel when assessing current and future independent contractor classification.
• Many states have independent contractor tests that differ from the DOL standard (e.g., the worker-friendly “ABC” test used in some form in several states), so it is critical that employers also consider applicable state law when making worker classification decisions.

For More Information

If you have any questions about this Alert, please contact Christopher D. Durham, Nicolette J. Zulli, any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.