Department of Labor proposes new rule that would make it easier to misclassify workers as independent contractors
Update: On February 26, 2026, the Department of Labor proposed a new regulation that would replace the 2024 Biden administration regulation with a weaker standard for determining independent contractor vs. employee status. The new rule, if adopted, would establish a version of the “economic realities test” similar to the one that the first Trump administration previously tried to finalize in a regulation shortly before they left office in 2021 (see EPI’s comment opposing that regulation here).
Timeline:
May 2, 2025: the U.S. Department of Labor published field guidance for the agency’s enforcement staff, announcing that they would no longer enforce DOL’s 2024 regulation on independent contractor status under the Fair Labor Standards Act. This announcement also included reinstating an opinion from the first Trump administration’s DOL that gave on-demand/gig economy apps a wide berth in determining whether workers on their platforms were truly independent contractors or should be classified as employees.
January 29, 2025: The U.S. Court of Appeals for the Fifth Circuit granted the Department of Labor’s request to delay oral arguments in a case challenging the 2024 rule. DOL has not yet dropped defense of the rule, merely delayed oral arguments while awaiting the transition of leadership at the agency. But it will be important to monitor whether they intend to continue defending the rule against litigation going forward.
The Department of Labor’s final rule, published in 2024, would have made it harder for employers to misclassify their workers as independent contractors. Workers misclassified as independent contractors lose out on critical protections, benefits, and labor rights including minimum wage, overtime pay, unemployment insurance, the right to form a union, and anti-discrimination protections in most states. Additionally, these workers bear the full financial costs of Social Security and Medicare contributions. EPI recently updated an analysis of the pay and benefits of workers in 11 commonly misclassified jobs. A typical construction worker, as an independent contractor, would lose as much as $19,526 per year in income and job benefits compared with what they would have earned as an employee. A typical truck driver, as an independent contractor, would lose as much as $21,532 per year, and a misclassified home health aide would lose up to $10,214 per year.
https://www.epi.org/policywatch/department-of-labor-delays-defense-of-independent-contractor-rule/
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