Independent Contractor Misclassification and Compliance News February 2025

As the independent workforce continues to grow, so do the issues of worker compliance and misclassification. It is important for enterprises to remain informed about the latest laws, regulations, and developments surrounding these topics. Each month, we bring you the latest news stories from around the web.

Trump DOL asks to Postpone Oral Arguments in Case Challenging Biden Administration’s Independent Contractor Rule

The Department of Labor under President Trump (Trump DOL) has asked to postpone oral arguments on an appeal to a challenge to the independent contractor rule issued by the Department of Labor under President Biden (Biden DOL). The Biden DOL’s independent contractor rule became effective in March 2024. The Biden DOL had rescinded the rule promulgated by the first Trump administration’s DOL and drafted its own rule.

The Biden DOL’s independent contractor rule was immediately challenged in lawsuits in federal courts. In one case, Frisard’s Transportation, L.L.C. v. U.S. Department of Labor, No. 24-30223 (5th Cir. Jan. 24, 2025), oral arguments were scheduled for February 5, 2025. The Trump DOL asked the court to postpone the oral arguments for 60 days due to the change in administration and the fact that, “new agency officials are currently in the process of onboarding and familiarizing themselves with the issues presented in this case and related litigation.” The postponement would allow, “new leadership with sufficient time to familiarize themselves with these issues and determine how they wish to proceed.”

It is widely expected that the Trump DOL will drop its defense of the Biden DOL independent contractor rule. While it is possible that the Fifth Circuit Court of Appeals will uphold the rule even though the Trump DOL does not defend it, it is unlikely. The expectation is that the court will invalidate the Biden DOL’s rule.

While the saga in the courts continue, it doesn’t really make much of a difference to companies who engage with independent contractors. Both the Biden DOL’s rule and the first Trump administration’s rule agree that the test for determining if workers are independent contractors or employees is the economic realities test—are workers as a matter of economic reality in business for themselves?

But while both rules agree on the economic realities test, they use different factors to determine if workers are in business for themselves. The first Trump administration’s rule focuses on two factors and will consider additional factors if the first two are not determinative. The Biden DOL uses a totality of the circumstances analysis. In most cases, the two rules lead to the same conclusion.

The fight between the Trump DOL and the Biden DOL over the independent contractor rule is interesting, but the outcome may not make much of a difference because both rules are the only Department of Labor’s interpretation of the Fair Labor Standards Act (FLSA) and court cases interpreting the FLSA. Courts are not required to follow the rule—they can follow it if they find it persuasive, but courts are more likely to rely upon their own interpretation of the FLSA and the case law interpreting.

Finally, many states have more stringent independent contractor classification statutes, and companies that engage with independent contractors should expect states to continue to enforce state laws.

For more information, check out our resources page on misclassification and compliance. If you have any questions about engagement, classification, or management of your independent workforce, we’re always here to help.