No Rest for the Weary: The Trump DOL Indicates Yet Another Change to Its Independent Contractor Classification Rule Is on the Horizon

Exactly a year ago, we wrote about the final rule issued by the Biden-era U.S. Department of Labor (DOL) regarding the test for determining whether a worker is an employee covered by the Fair Labor Standards Act (FLSA), or an independent contractor exempt from FLSA coverage. The final rule became effective on March 11, 2024 (the “2024 rule”) and replaced the DOL’s independent contractor test that was adopted in 2021 during the first Trump administration (the “2021 rule”), which made it made it easier to classify workers as independent contractors. We previously wrote about the 2021 rule here.

Recent developments suggest that, under new leadership, the DOL may abandon the short-lived 2024 rule and implement changes to its guidance on this issue in the near future.

Recent Developments Suggest the DOL’s New Leadership May Abandon the 2024 Biden-Era Rule

Soon after the Biden-era’s publication of the 2024 rule, several lawsuits were filed against the agency arguing that it exceeded its authority in adopting the 2024 rule. The leading case, Frisard’s Transp., LLC v. United States DOL, No. 24-30223, is currently pending on appeal before the Fifth Circuit. The case originated when Frisard’s Transportation, LLC, along with other plaintiffs, filed a lawsuit, in the U.S. District Court for the Eastern District of Louisiana on February 8, 2024 (Case No. 2:24-cv-00347). The plaintiffs sought a preliminary injunction to block the rule, but on March 27, 2024, the district judge denied the motion, finding the plaintiffs could not show immediate irreparable harm because the rule’s impact on their business was speculative at that stage. Following this denial, the plaintiffs appealed to the Fifth Circuit on April 8, 2024, arguing that the district court erred in denying the preliminary injunction. Several amicus briefs supporting the plaintiffs were filed by organizations such as the U.S. Chamber of Commerce, the Manhattan Institute, and others, emphasizing the rule’s broad economic implications.

The Fifth Circuit was scheduled to hear oral arguments on the appeal in the Frisard’s case on February 5, 2025; however, the DOL requested to delay the scheduled argument to allow sufficient time for its newly confirmed leadership to familiarize themselves with the issues presented in the case and “determine how they wish to proceed.” The Fifth Circuit initially ordered the DOL to file a status report no later than March 25, 2025, stating its position regarding the litigation under its new leadership, but that deadline was recently extended to April 7, 2025.

Confirmation of Secretary of Labor Creates Some Difficulty in Predicting the DOL’s Next Steps

If we were asked to predict the fate of the 2024 rule on November 6, 2024, we would not have hesitated in forecasting a return to the more employer-friendly 2021 rule adopted during the first Trump administration. The subsequent nomination and senate confirmation of U.S. Secretary of Labor Lori Chavez-DeRemer, however, leaves us less confident in making that prediction. Chavez-DeRemer served as the U.S. representative for Oregon’s 5^th congressional district between 2023 and 2025. Though a member of the Republican Party, Chavez-DeRemer has an unusually pro-labor congressional record as one of only three House Republicans to co-sponsor the Protecting the Right to Organize (PRO) Act, proposed legislation that would strengthen employee rights under the National Labor Relations Act and other labor laws. Significant to the question of independent contractor classification, the PRO Act would impose California’s ABC test for determining independent contractor status and make it even more difficult to classify workers as independent contractors for purposes of questions under the NLRA.

While Chavez-DeRemer has not made any specific commitments regarding the 2024 rule, she walked back her support for the PRO Act, acknowledging on several occasions that the PRO Act was “imperfect.” She also agreed that worker flexibility and independent contractors were key to growing the economy and committed to reviewing all of the DOL’s regulations to determine whether they support President Trump’s agenda.

In light of Chavez-DeRemer comments during her senate confirmation hearing, we anticipate that the DOL will ultimately rescind the 2024 rule and drop its defense of the rule in the Frisard’s case and the other pending legal challenges. Following that, the DOL may restore the more employer-friendly 2021 rule, or it might not adopt any replacement rule and simply let courts analyze questions regarding independent contractor classification under their own case precedents, without agency guidance.

What This Means for Employers

Despite the anticipated employer-friendly changes at the DOL, employers should continue to proceed with caution in classifying workers as independent contractors. Notably, the Supreme Court’s watershed decision in Loper Bright means that any new DOL guidance defining the test for distinguishing employees from independent contractors under the FLSA may not be entitled to judicial deference anyway. Employers would therefore be wise to continue evaluating the following key questions when deciding whether workers may be classified as independent contractors:

• What is the nature and degree of the control that the worker has over their own work? For example, does the worker control how and when the job will be performed and the pricing for the services?

• What is the worker’s opportunity for profit and loss? Is the worker required to make their own investments to perform the services?
• Does the work require a special or unique skillset?

• Is the work integral to the company’s core business?

• Is the worker’s relationship with the company non-exclusive and are the services provided on a project-specific or sporadic basis, rather than indefinitely or continuously?

• Does the company have employees performing the same services as the worker?

Employers should also keep in mind that other federal laws (such as the Family and Medical Leave Act and the Internal Revenue Code) may impose different standards for distinguishing employees from independent contractors and that courts may differ by jurisdiction in their interpretation of these standards. Additionally, many states have adopted their own standards for distinguishing employees from independent contractors under state employment laws.