On May 13, 2025, the U.S. Department of Labor’s (DOL) Wage and Hour Division (WHD) issued a new Field Assistance Bulletin (FAB) offering updated guidance on how agency investigators should determine whether a worker is an employee or an independent contractor under the Fair Labor Standards Act (FLSA). This update has important implications for employers navigating worker classification compliance while the 2024 final rule remains under legal review.
Background
The DOL’s 2024 final rule, Employee or Independent Contractor Classification Under the Fair Labor Standards Act, sought to redefine classification criteria but is currently being challenged in federal court. While this legal review is ongoing, the DOL has directed WHD investigators not to apply the 2024 rule in enforcement matters. However, the guidance notes that “the 2024 Rule remains in effect for purposes of private litigation”.
What Guidance is Being Followed?
Until the legal status of the 2024 rule is resolved, the WHD will base its enforcement on:
- Fact Sheet #13, which outlines traditional “economic realities” tests.
- Opinion Letter FLSA2019-6, which provides analysis specific to virtual marketplace platforms and other modern work arrangements.
This approach does not alter the FLSA’s current regulations but clarifies how enforcement resources will be allocated in the interim.
Key Considerations for Employers
Although still under review, it is not currently being used to assess classification in active investigations. Any conflicting direction previously provided to WHD staff is replaced by this bulletin. The Wage and Hour Administrator retains authority to investigate individual misclassification cases deemed appropriate.
Why This Matters
Worker classification under the FLSA affects minimum wage, overtime, and other wage and hour protections. Misclassification of employees as independent contractors can result in significant liability, including unpaid wages, liquidated damages, and civil penalties. The DOL’s clarification helps employers maintain compliance amid regulatory uncertainty and underscores the importance of correctly applying long-standing classification principles.
Next Steps for Employers
To mitigate risk and ensure compliance, employers should:
- Evaluate independent contractor agreements and working arrangements against the “economic realities” test outlined in Fact Sheet #13.
- Not solely rely on the 2024 classification criteria when making worker status determinations. Instead, apply the traditional six-factor test including the nature of the work relationship, control, investment, skill required, opportunity for profit/loss, and permanence.
- Maintain thorough documentation supporting contractor classifications, including signed agreements, job descriptions, and records demonstrating the lack of employer control or integration into business operations.
- Continue to track updates regarding the 2024 final rule and any subsequent court decisions that may impact classification standards.
- Check applicable state laws, as some jurisdictions impose stricter or more specific standards for determining independent contractor status.
- Consult with legal to ensure compliance and minimize risks associated with misclassification.
