In 2024, the Department of Labor adopted regulations limiting the definition of independent contractors exempt from the provisions of the Fair Labor Standards Act’s overtime and minimum wage requirements. The 2024 rule replaced one issued during the first Trump administration that based the independent contractor/employee distinction on the principal’s right to control the work performed and the worker’s opportunity for profit or loss. The 2024 regulation added additional factors to this analysis, including the duration of the relationship and how integral the work performed is to the business' operations.
The addition of these factors meant that fewer contractor relationships met this burden. The 2024 rule faces a number of ongoing legal challenges. Last week, DOL announced that it will no longer enforce the 2024 rule. While not attempting to repeal that regulation, this move means that practically, the department will not seek to hold companies liable for FLSA violations based on the expanded test. This announcement may also indicate that DOL intends to promulgate new regulations intended to replace the 2024 rule.
For now, employers should carefully evaluate work arrangements to make sure they meet applicable classification tests for independent contractors. The DOL announcement means that for federal enforcement purposes, this evaluation will not include the additional factors contained in the 2024 rule.
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