DOL Issues Revised Independent Contractor Misclassification Guidance

The classification of “independent contractors versus employees” – a political football that has undergone many iterations as the White House switched between political parties – has again changed hands. The U.S. Department of Labor (“DOL”) has now introduced new guidance, consistent with earlier Republican iterations, while rejecting the 2024 Democratic formulation. It remains to be seen whether the courts will give DOL much deference in this area.

On May 1, 2025, the DOL issued Wage and Hour Memorandum No. 2025-1 (the “2025 Guidance”), providing revised guidance regarding the framework for determining “employee versus independent contractor status” under the Fair Labor Standards Act (“FLSA”). More specifically, the 2025 Guidance states that the DOL’s Wage and Hour Division (“WHD”) will no longer apply its 2024 rule entitled “Employee or Independent Contractor Classification Under the Fair Labor Standards Act,” 89 Fed. Reg. 1638 (the “2024 Rule”). Instead, the WHD will enforce the FLSA in accordance with prior guidance from 2008 and 2019 (the “2008 Guidance” and “2019 Guidance,” respectively). Notably, however, the 2024 Rule still “remains in effect for purposes of private litigation.”

The 2025 Guidance is only the most recent swing of the pendulum on an issue on which the DOL has shifted according to the politics of governing Administrations. The 2024 Rule, issued by the DOL under the Biden Administration, replaced the prior rule, which had been released in January 2021, but was then delayed and withdrawn by the incoming Biden Administration prior to becoming effective (the “2021 Rule”). While acknowledging the “multifactor economic reality” test utilized by courts and the WHD in analyzing worker status, the 2021 Rule, more favorable to employers, had sought to “streamline[]” the analysis by designating just two “core factors” as having the greatest weight: (1) the nature and degree of control over the work; and (2) the worker’s opportunity for profit or loss. The 2024 Rule, by contrast more favorable to workers, “return[ed] to a totality-of-the-circumstances analysis,” in which no factor was assigned a “predetermined weight.” The 2024 Rule described the 2021 Rule’s elevation of “control” and “opportunity for profit and loss” as a “departure from longstanding precedent” and as being in tension with the FLSA.

Neither the 2025 Guidance – nor the 2008 and 2019 Guidance on which it relies – explicitly calls for the primacy of certain factors as set forth in the 2021 Rule. Nonetheless, the 2025 Guidance confirms the DOL’s shift away from the Biden-era analysis, and signals that further rulemaking may follow. Specifically, the 2025 Guidance states that, in the context of litigation, the DOL has taken the position that it is “reconsidering the 2024 Rule, including whether to rescind the regulation.”

While additional rulemaking will likely shift the DOL’s position closer to that expressed in the 2021 Rule, the practical impact of such a rule on any subsequent litigation poses an entirely different question in light of the Supreme Court’s 2024 decision in Loper Bight Enterprises v. Raimondo, which overturned the Chevron doctrine requiring courts to give deference to agency interpretations of ambiguous statutes. Given the shifting nature of the DOL’s position on this issue, courts may increasingly refuse to grant deference to its interpretation, and may look instead to existing case law in applying the multifactor economic realities test to determine independent contractor classification.