Trump Administration to Rescind Biden-Era Independent Contractor Rule—What Could a New Rule Look Like?

Quick Hits

• The Trump administration is scheduled to rescind the Biden-era independent contractor rule, months after the DOL stopped enforcing the current rule.
• The current independent contractor rule, issued in 2024, adopted the multifactor “totality of the circumstances” test that has been used by the courts for years, albeit with commentary signaling enforcement of various factors in a manner that was wrought with potential challenges for employers. This rule still faces numerous legal challenges as a result.
• Although the immediate action is deregulatory, it is anticipated that the DOL may eventually pursue a more pro-business rule, similar to the 2021 rule.

According to the Trump administration’s most recent regulatory agenda, the DOL plans to formally rescind the current independent contractor rule and “is considering how it will proceed concerning independent contractor classification under the FLSA.” The decision comes after the DOL’s Wage and Hour Division (WHD) issued guidance in May 2025 directing its field offices to stop applying the 2024 rule’s analysis when enforcing the FLSA.

Worker classification is a significant issue for employers, as independent contractors are not subject to the minimum wage and overtime requirements, among other benefits. The issue has taken on even greater significance in recent years with the rise of the “gig economy,” which utilizes short-term contracts and freelancers. While courts were not required to follow the DOL rule in practice, it was persuasive.

What Is the Current Rule?

The Biden-era rule, which took effect in March 2024, adopted a multifactor totality of circumstances test that has been used by courts for years when determining whether someone is an independent contractor or employee under the FLSA. The commentary to the 2024 rule, however, advocated for stricter application of various factors in a manner that would lead to more workers being classified as employees. The rule has faced multiple legal challenges from business groups, arguing that it unlawfully interferes with contractual relationships and deprives millions of the right to work as independent contractors.

Specifically, the 2024 rule focuses on six equally balanced “economic reality” factors: (1) “Opportunity for profit or loss depending on managerial skill,” (2) “Investments by the worker and the potential employer,” (3) “Degree of permanence of the work relationship,” (4) “Nature and degree of control,” (5) “Extent to which the work performed is an integral part of the employer’s business,” and (6) “Skill and initiative.” The commentary regarding these factors, however, made it clear that the DOL would enforce them in a manner more likely to result in an employment finding.

The 2024 rule diverged from the prior rule, which took effect in January 2021 after being proposed during President Donald Trump’s first term. While that rule also focused on several factors, it elevated two “core” factors in the worker classification analysis: (1) the nature and degree of control over the relevant work, and (2) an individual’s opportunity for profit or loss. If the facts tipped one way or the other based on those factors, then the analysis ended. However, if the two factors tipped in opposite directions, then the WHD would consider more factors. Pro-business groups believed this test provided companies with much greater clarity regarding the independent contractor analysis and would make it easier to classify workers as independent contractors.

Notably, whereas the 2024 rule focused on an employer’s potential control over a worker, including in instances where that control may be necessary due to customer or legal requirements, the 2021 rule said that an employer’s reserved but unexercised control over a worker was less relevant to the analysis.

The takeaway is that applying the 2021 rule generally results in more workers being classified as independent contractors, whereas applying the 2024 rule generally results in more employees.

What Could a Return to the 2021 Rule Mean?

Although the DOL’s rulemaking anticipated in September 2025 is deregulatory in nature, it is anticipated that the DOL may eventually promulgate a rule taking a streamlined approach similar to the prior rule proposed during President Trump’s first term. The 2021 rule focuses on two core factors, providing businesses with greater clarity and leeway to classify workers as independent contractors.

Thus, returning to the DOL’s 2021 rule or adopting a similar independent contractor analysis could provide employers more certainty over worker classification and allow greater flexibility in workforce management, particularly for those in the “gig economy” and other industries that rely on temporary, seasonal, or project-based workers.

What Employers Can Do Now?

Despite the DOL’s regulatory agenda and decision to stop enforcing it, the 2024 rule has yet to be formally rescinded and technically remains in effect. Further, while the regulatory agenda indicates that the formal rescission could be published as early as September 2025, the DOL is unlikely to do so or provide additional guidance while the federal government remains in a shutdown.

No matter what rule is ultimately adopted by the DOL, however, courts are not bound by the DOL’s rule. Independent contractor relationships continue to face strict scrutiny in the courts and with government agencies alike, not to mention being subject to regular challenge in class and collective actions by the plaintiffs’ bar. In addition, several states impose stricter tests for worker classification, notably California’s “ABC” test and other states using a similar ABC test, including Illinois, Massachusetts, and New Jersey, among others.

Companies that use independent contractors may want to review and assess their current worker classifications to ensure individuals retained as independent contractors truly satisfy the requirements for such classification under the law. This includes not only a solid independent contractor agreement with all of the necessary provisions, but also ensuring the relationship, in practice, conforms to the letter of the agreement. These day-to-day practices can be critical in the event of an audit.

Ogletree Deakins’ Wage and Hour Practice Group will continue to monitor developments and will provide updates on the Governmental Affairs and Wage and Hour blogs as additional information becomes available.

This article and more information on how the Trump administration’s actions impact employers can be found on Ogletree Deakins’ Administration Resource Hub.

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