ABC Applauds DOL’s Proposal to Rescind Independent Contractor Rule

On Feb. 26, the U.S. Department of Labor announced a proposed rule that will rescind and replace the ABC-opposed 2024 Employee or Independent Contractor Classification Under the Fair Labor Standards Act final rule.

ABC strongly supports the DOL’s proposed rule to rescind the Biden-era 2024 independent contractor final rule and replace it with a commonsense proposal similar to the ABC-supported 2021 final rule. The 2024 final rule creates an ambiguous and difficult-to-interpret standard for determining independent contractor status. Under the rule’s multifactor test, employers are forced to guess which factors should be given the greatest weight in making the determination.

Instead of promoting much-needed economic growth and protecting legitimate independent contractors, the 2024 final rule results in more confusion and expensive, time-consuming, unnecessary and often frivolous litigation, as both employers and workers will not understand who qualifies as an independent contractor.

In the DOL release, the agency highlighted that the proposed rule would:

• Apply an “economic reality” test to determine whether a worker is in business for himself or herself as an independent contractor or is an employee economically dependent on an employer for work.
• Identify and explain two “core factors” to help determine if a worker is economically dependent on an employer for work or in business for him- or herself:
  • The nature and degree of control over the work.
  • The worker’s opportunity for profit or loss based on initiative and/or investment.
• Identify other factors to help determine a worker’s status as an employee or independent contractor, including the amount of skill required for the work, degree of permanence of the working relationship, and whether the work is part of an integrated unit of production.
• Advise that the actual practice of the worker and the potential employer is more relevant than what may be contractually or theoretically possible.
• Provide eight fact-specific examples applying the factors to real-life circumstances

“ABC is pleased to see the DOL is proposing to simplify and clarify the factors for determining when a worker is an independent contractor versus an employee under the Fair Labor Standards Act,” said Kristen Swearingen, ABC vice president of government affairs, in a news release. “ABC looks forward to providing comments to the DOL on the proposed rule.”

ABC looks forward to providing comments to the DOL by the deadline of April 28.

To learn more, read ABC general counsel Littler’s analysis.

On May 1, 2025, the DOL announced that it would pause enforcement of the 2024 final rule in current enforcement matters while the agency reviewed this regulation.

ABC, its Southeast Texas chapter, the Coalition for Workforce Innovation and five other organizations are challenging the 2024 final rule in federal court, which is currently pending.