US Department of Labor Issues Guidance on Independent Contractor Misclassification Enforcement

On May 1, 2025, the U.S. Department of Labor's Wage and Hour Division (WHD) issued Field Assistance Bulletin No. 2025-1, providing updated guidance on enforcing the Fair Labor Standards Act (FLSA) concerning independent contractor misclassification. This bulletin supersedes previous guidance and clarifies how WHD field staff should determine whether a worker is an employee or an independent contractor under the FLSA.

While this new guidance does not alter existing regulations, it reflects the Department's current enforcement priorities during its ongoing review of the 2024 independent contractor rule. The Department retains the authority to pursue enforcement actions in individual cases deemed appropriate by the Wage and Hour Administrator or a designee.

The 2024 rule, effective March 11, 2024, reinstated the "economic realities" test for determining worker classification, emphasizing factors such as the degree of control over the work, the worker's opportunity for profit or loss, and the permanence of the working relationship. This rule rescinded the 2021 independent contractor rule, which had been considered more favorable to businesses.

Despite ongoing legal challenges, a federal judge upheld the 2024 rule in January 2025, affirming the Department's authority to implement it. However, the Department has indicated a potential reconsideration of the rule, and enforcement may be adjusted accordingly.

Employers should review their worker classifications in light of this updated guidance to ensure compliance with the FLSA.