The U.S. Department of Labor (DOL) has advanced a proposed rule to update its standard for classifying independent contractors under the Fair Labor Standards Act, signaling a potential shift under the Trump administration. While details of the proposal have not yet been released, the move raises the possibility that DOL may return to the “economic reality” test finalized near the end of President Trump’s first term. That approach emphasized two core factors—worker control and opportunity for profit or loss—while considering additional, less-weighted factors such as skill level, permanence of the relationship, and integration into production.

The Biden administration rescinded the 2021 Trump-era rule and replaced it with a multi-factor, totality-of-the-circumstances test that took effect in March 2024, despite legal challenges. After President Trump’s return to office in 2025, DOL halted enforcement of the 2024 rule and announced plans to revisit the regulations.

Although the current proposal’s contents remain unclear, recent agency actions—including a May opinion letter referencing “economic reality”—suggest a renewed emphasis on that framework, a development NAIFA will be paying very close attention to.

Prospects: Considering the speed with which the new Administration paused the Biden economic standard, there is a keen interest on returning to the earlier-Trump era rule in a timely manner, which should unfold in a standard comment period.

NAIFA Staff Contacts: Mike Hedge – Senior Director – Government Relations, at mhedge@naifa.org.