Overview of the 2024 Independent Contractor Rule
The 2024 independent contractor rule, issued by the U.S. Department of Labor (DOL), took effect on March 11, 2024. This rule provides interpretive guidance on how the DOL determines whether a worker is classified as an employee or an independent contractor under the Fair Labor Standards Act (FLSA) for enforcement purposes.
Key Features of the 2024 Rule
Return to the “Economic Reality” Test
- The rule replaces the more employer-friendly 2021 rule and reinstates a broader, “totality of the circumstances” approach, focusing on the economic realities of the worker’s relationship with the employer.
- The central question is whether the worker is economically dependent on the employer (employee) or is in business for themselves (independent contractor).
Six-Factor Test ~ The rule adopts a six-factor, non-exhaustive test. No single factor is determinative, and all must be weighed equally, though some may be more relevant depending on the situation:
- Opportunity for profit or loss depending on managerial skill
- Investments by the worker and the potential employer
- Degree of permanence of the work relationship
- Nature and degree of control over performance of the work and working relationship
- Extent to which the work performed is an integral part of the employer’s business
- Skill and initiative required for the work
The DOL may also consider additional factors relevant to the question of economic dependence.
*Implications for Businesses:
- The rule makes it more difficult for businesses to classify workers as independent contractors, increasing the risk of misclassification and potential legal or financial penalties.
- Employers are advised to audit their contractor relationships and ensure proper classification to avoid liability for back pay, benefits, and other penalties.
Enforcement Status (as of May 2025)
- As of May 2025, the DOL announced it is no longer enforcing the 2024 rule while it works on a new standard that may make it easier to classify workers as independent contractors.
- However, the 2024 rule remains relevant for private litigation, and businesses should continue to exercise caution in worker classification.
Important Notes
- The rule applies under the FLSA; different laws (e.g., state wage laws, IRS rules) may use different tests for classification.
- California and some other states use stricter standards (like the “ABC” test), which are not affected by this federal rule.
In summary, the 2024 independent contractor rule adopts a broader, multifactor “economic reality” test, making it harder for businesses to classify workers as independent contractors under federal law. However, as of May 2025, the DOL has paused enforcement of this rule while it considers further revisions.
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Jan Wangler, Executive Director 