The U.S. Department of Labor (DOL) has quietly but significantly shifted how it will approach enforcement of independent contractor classification under the Fair Labor Standards Act (FLSA). While the Biden administration’s 2024 rule is still technically in place, the May 2025 Field Assistance Bulletin (FAB 2025-1) makes it clear that the agency is no longer enforcing it. For employers who rely on flexible workforce arrangements like independent contractors and 1099 consultants, it’s important to understand what is changing and what isn’t.
The Road So Far
In early 2024, the DOL finalized a rule that imposed a structured six-factor “totality of the circumstances” test to determine whether a worker is an independent contractor or an employee. The goal was to make it more difficult for employers to classify workers as independent contractors, particularly in industries with heavy reliance on contingent labor. In the wake of political pressure and litigation, the May 2025 bulletin reverted enforcement to the older, more flexible “economic realities” test. While the 2024 rule still applies in private litigation, the DOL will no longer use it when auditing employers or pursuing enforcement actions.
What Employers Should Know
For HR teams, legal counsel, and business owners, this shift in enforcement has practical implications. For example, you’ll have:
- More flexibility in structuring and defending independent contractor relationships
- A lower risk of federal enforcement penalties
- State-specific complexities in jurisdictions like California, Massachusetts, and New Jersey, where stricter rules (such as the ABC test) still apply
The economic realities test is not a free pass. Instead, it’s a change that employers should adapt to. We are here to help support you through your transition back to the older DOL rules.
How You Can Navigate the Grey Area
At TriBridge Partners, we help clients stay ahead of regulatory changes and mitigate compliance risks. Here are five steps we recommend in the wake of this change.
1.Audit Existing Contractor Relationships
Apply the “economic realities” test, which looks at:
- Control over the work
- The worker’s profit/loss opportunity
- Investment in tools or equipment
- Permanence of the relationship
- The worker’s skill and initiative
- Whether the work is integral to your business
2. Remember: Federal Isn’t Everything
The DOL’s shift doesn’t override state law. States like California, New Jersey, and Massachusetts are still keeping their stricter rules in place, so you must be prepared to follow them. Multi-state compliance strategies are essential for national employers.
3. Update Written Agreements
Independent contractor agreements should be updated to support classification under the economic realities test. Remember that contracts alone don’t determine status. Instead, how the relationship works in practice matters most.
4. Train Managers and Staff
Misclassification often happens at the departmental level. Provide workforce compliance training so that your managers understand how to work with contractors without creating an employment relationship.
5. Monitor Changes Continuously
Political and judicial shifts can quickly alter compliance obligations. Build a process for tracking developments, much like you would with employee benefits regulations, and have the right partners on your side.
Proactive Beats Reactive
The DOL’s revised enforcement stance is a temporary reprieve for some employers, but it’s no reason for complacency. The best move is always to be proactive. Whether you’re reassessing your independent contractor arrangements, updating multi-state compliance plans, or building future-ready workforce models, our team can help you move forward with confidence. To learn more, please call our office at 240-422-8799 or email Jessica Storck at Jessica.storck@tribridgepartners.com.
