U.S. Department of Labor Changes Position on Employee v. Independent Contractor Test

On May 1, 2025, the United States Department of Labor (“DOL”) announced that it would no longer enforce the 2024 Biden-era test for determining whether a worker is an employee or independent contractor under the Fair Labor Standards Act. The 2024 test used a totality-of-the-circumstances analysis that increased the likelihood that a worker would be classified as an employee.

The DOL did not expressly revoke the 2024 test, but rather stated that “agency investigators are directed not to apply the 2024 rule’s analysis in current enforcement matters.” In its place, the DOL will enforce the pre-existing test promulgated in 2008, commonly known as the economic realities test. The economic realities test is generally viewed as a more business-friendly test than the 2024 test. Under the economic realities test, the DOL will look to the following non-exhaustive list of factors to determine whether a worker is an employee or an independent contractor:

1. The extent to which the services rendered are an integral part of the principal’s business.
2. The permanency of the relationship.
3. The amount of the alleged contractor’s investment in facilities and equipment.
4. The nature and degree of control by the principal.
5. The alleged contractor’s opportunities for profit and loss.
6. The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor.
7. The degree of independent business organization and operation.

Unlike the 2024 test that focuses on a totality approach, the 2008 test states that certain facts (e.g., where the work is performed) are immaterial in determining whether there is an employment relationship. More guidance on the enforcement of the 2008 test is expected in the near future.

The DOL’s press release detailing the above changes can be found here: DOL Press Release

Businesses with questions about whether a worker should be properly classified as an independent contractor or an employee under federal or state law, please contact Nate Wolf, Nikole Canute, Scott Dwyer, Dominic Clolinger, or Kathryn Stegink as soon as practicable.