Proper classification of workers as either employees or independent contractors remains a significant issue for businesses and workers. The DOL’s Wage and Hour Division recently announced a significant change in its enforcement approach to worker classification, temporarily stepping back from the controversial 2024 final rule.
POLICY CHANGE DETAILS
In a new bulletin, the agency directed its investigators to stop applying the 2024 "Employee or Independent Contractor Classification Under the Fair Labor Standards Act" rule in current enforcement actions. The 2024 rule tightened requirements for independent contractor classification.
This move comes while the department reviews the rule, which is simultaneously facing legal challenges in federal court.
Instead, the Wage and Hour Division will return to relying on longstanding principles outlined in Fact Sheet #13, supplemented by the reinstated Opinion Letter FLSA2019-6, which specifically addresses classification issues for virtual marketplace platforms. Those principles include a 6-factor test to determine if a worker is a true independent contractor.
IMPACT ON BUSINESSES AND WORKERS
This shift in enforcement priorities appears to provide temporary loosening of the requirements for independent contractor classification, for both businesses and workers operating in the modern gig economy and other sectors where classification questions frequently arise.
However, the DOL emphasized that this guidance does not change existing regulations, but reflects a “strategic allocation of enforcement resources during the review period.”
Despite this temporary shift in approach, the DOL maintains that it reserves the right to exercise enforcement authority in individual cases deemed appropriate by the Wage and Hour Administrator.
Businesses should remain vigilant and consult with competent employment counsel before making decisions regarding worker classification.
For any questions or assistance, contact Avrohom Gefen.
