DOL Will Reverse Course on Biden-Era Independent Contractor Rule. What Does it Mean for Employers?

By John S. Gannon - Skoler Abbott P.C.

May 8, 2025

Last week, the U.S. Department of Labor (“DOL”) announced it will stop enforcing a rule issued during the Biden Administration that was used to determine whether workers should be classified as independent contractors or employees under federal wage-and-hour law.  Going forward, the DOL will apply an older, more flexible standard that is more favorable to employers.  Remember, if a worker is properly classified as an independent contractor, businesses do not need to worry about minimum wage, overtime pay, and other protections afforded to employees under federal law and some states’ laws.

Background

The DOL’s independent contractor test has undergone several changes over the last few years.  Back in January 2021, the first Trump Administration issued an independent contractor rule aimed at clarifying the core factors to be used when DOL and courts examine whether a worker is misclassified as an independent contractor.  That rule was popular with businesses and workers who wanted to continue working as independent contractors, particularly those working in the gig economy (such as DoorDash delivery persons and ride-share drivers).  Then, in 2024, the Biden Administration sought to create its own rule, which generally made it harder to classify workers as independent contractors.  We previously discussed that rule here.

Where Do Things Stand Now?

As noted above, the DOL is rolling back the Biden-era stance on independent contractor classification and will return to applying a more business-friendly standard.  This new (and old) test focuses on the economic reality of the workers’ relationships with the business they work for, which may or may not be considered their “employer.”   The factors the DOL will consider are set out in guidance issued by that agency back in July 2008, which can be found here.

What Does This New Approach by the DOL Mean for Employers in the New England Area?

The short answer:  Not much.  States like Massachusetts and Connecticut follow the stricter “ABC Test” when it comes to independent contractor classification.  This test presumes a worker is an employee — rather than an independent contractor — unless employers can prove:

1. the individual is free from control and direction in connection with the performance of the service; and
2. the service is performed outside the usual course of the business of the employer; and
3. the individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.

Under the “ABC Test”, simply allowing to workers to choose their own hours and paying them via a 1099  is not enough.  The worker must also be performing services that are different from the core services of the business.  Plus, the worker must have an independently  established business, such as their own LLC, and should host their own website and use phone/email contact information that is different from the employer.  The independently  established business should also have other clients and not be restricted to providing work to one business.

If you have workers that might be misclassified independent contractors, don’t wait to address this problem.  In Massachusetts, the damages for misclassification errors can be incredibly costly, and successful plaintiffs also get reimbursed for all attorney’s fees associated with their misclassification claim.  If you or your company has any questions about your obligations under federal or state independent contractor laws, consider contacting experienced labor and employment counsel today.

www.skoler-abbott.com