U.S. Department of Labor Returns to an Older Independent Contractor Standard
U.S. Department of Labor Returns to an Older Independent Contractor Standard
May 19, 2025
U.S. Department of Labor Returns to an Older Independent Contractor Standard
On May 1, 2025, that it will not enforce the Biden administration鈥檚 2024 independent contractor rule while DOL considers a new rule, In the interim, DOL will enforce a previous independent contractor standard, first put in place in and affirmed in .
The 2024 rule made it more difficult for small businesses to hire and classify workers as independent contractors. It introduced a confusing 鈥渢otality of the circumstances鈥� analysis, weighing a list of six factors. 网曝吃瓜聽聽the 2024 rule and joined a聽聽in the U.S. District Court for the Eastern District of Texas challenging the rule.
The standard to which DOL has returned lists the same six factors used in the 2024 rule, the factors are defined very differently, making them easier to apply:
1) Control. This factor asks whether the potential employer imposes strict shifts, large quotas, or long hours. This is a significant improvement over the 2024 鈥渃ontrol鈥� factor, which required a deep inquiry into the minutia of the contract and how work is performed. The current standard simply considers if the contractor is free to pursue other work.
2) The permanency of the relationship. This factor will lean in favor of independent contractor status so long as the work is done on a project-by-project basis, even if it鈥檚 long-term. The 2024 rule punished businesses who had long-term contractors, while the current standard just wants to make sure that a contractor is hired by-job rather than as an employee.
3) The amount of investment in facilities and equipment. This factor asks whether a worker purchases the tools necessary to perform the service. The 2024 rule, in contrast, focused on whether the worker grows his or her business, and did not count the purchase of tools for particular jobs toward such investments.
4) Skill, initiative, judgment, or foresight required. This factor will weigh towards independent contractor status if the worker chooses between different jobs and doesn鈥檛 require job training from the potential employer. The 2024 rule, however, considered that a specialized skill alone (i.e. welding) isn鈥檛 enough to set someone apart as an independent contractor鈥攈e or she would have to effectively market his or her skills to achieve that status. The new skill standard is a significantly lower hurdle.
5) Opportunities for profit and loss. This factor asks whether a worker receives a predetermined amount of compensation for every job (which leans in favor of employee status) or whether they can choose between jobs that have different rates of pay. Even if pay is predetermined, so long as the worker gets to choose jobs, this leans in favor of independent contractor status. This standard is much simpler than the 2024 rule, which examined a variety of decisions made by a worker, including whether the worker negotiates his or her pay, decides to accept or decline work, hires his or her own workers, purchases materials and equipment, or engages in marketing or advertising.
6) Integrality. This factor will weigh in favor of employee status only when a worker is an integral part of a business鈥檚 primary purpose. The 2024 rule introduced vague interpretations into this factor, making it confusing and difficult to apply.
DOL鈥檚 abandonment of the 2024 rule and a return to a clearer standard will be beneficial for small businesses.
网曝吃瓜 is a member-driven organization advocating on behalf of small and independent businesses nationwide.
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