Independent Contractor Rule Set for Overhaul under Trump Administration

The Trump administration is moving to rescind the Biden-era independent contractor (IC) rule at
the Department of Labor and replace it with its own guidelines, continuing more than a decade
of regulatory back-and-forth over worker classification.

The Labor Department in August published its regulatory agenda, which listed plans to withdraw
the 2024 rule and issue a replacement. “The Department is considering how it will proceed with
respect to independent contractor classification under the Fair Labor Standards Act,” the
agenda said.

The IC rule guides the Wage and Hour Division in cases where complaints are filed over
whether workers were misclassified as contractors instead of employees. Worker classification
affects eligibility for overtime pay, benefits, and other protections under federal labor law.

This latest move extends a regulatory tug-of-war spanning the Obama, Trump, Biden, and now
Trump administrations. The Obama rule was replaced late in Trump’s first term but was not
implemented until just before Biden took office in 2021. The Biden administration attempted to
scrap it, but a court blocked that effort in 2022, ruling proper procedures had not been followed.
Biden’s revised rule eventually took effect in early 2024.

The Trump administration had already signaled its intent to undo the Biden rule. In a lawsuit
brought by the Louisiana Motor Transport Association, the Justice Department—now under
Trump—aligned with the association’s arguments and asked the court to delay oral arguments,
indicating it planned to replace the rule.

In a separate move, Acting Wage and Hour Administrator Donald Harrison instructed regional
offices on 1 May to stop applying the Biden rule when investigating worker status. “WHD will no
longer apply the 2024 Rule’s analysis when determining employee versus independent
contractor status in FLSA investigations,” Harrison wrote in a memo. However, the rule has not
yet been formally withdrawn.

While the IC rule has drawn attention, some labor attorneys argue its impact is overstated.
Richard Reibstein of Troutman Pepper, who specializes in IC issues, wrote earlier this year that
the rule would “hardly ripple the waters” because courts, not regulators, ultimately determine the
law.

Both Democratic and Republican administrations have used similar multi-factor tests to
determine worker status, focusing on issues such as independence, control, and profit potential.
The Trump framework places greater weight on a worker’s opportunity to earn profits and the
degree of employer control, while the Biden rule takes a broader “totality-of-the-circumstances”
approach.