Federal Independent Contractor Rule Update
Jersey Desk/10298105

MANAHAWKIN, N.J. - JerseyDesk -- The U.S. Department of Labor (DOL) has announced a significant shift in its enforcement approach regarding independent contractor classification. In a May 1, 2025 Field Assistance Bulletin (FAB 2025-1), the department stated that it will pause enforcement of the independent contractor rule, finalized in March 2024, while it reviews the regulation.

Background on the  Rule

The 2024 rule aimed to tighten restrictions on who could be classified as an independent contractor, making it harder for companies to avoid providing benefits and workplace protections. It introduced a more complex "economic reality" test, requiring employers to weigh factors such as:

• Control over work schedule
• Permanency of employment
• Integration of work into the company's core operations.

2025 Approach

The Department of Labor has recently announced that it has opted to pause enforcement rather than formally rescind the rule. The department clarified that this decision does not change existing regulations but instead reflects how enforcement resources are being allocated during the review process. Many speculate that this move could lead to either a new rule or a full rescission of the 2024 regulation. ViewFactsheet (https://www.dol.gov/agencies/whd/fact-sheets/13-flsa-employment-relationship)here for more details.

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Impact on Small Businesses

In addition to the independent contractor rule, the Treasury Department has also announced a pause on enforcement of a Corporate Transparency Act requirement. This rule, passed in 2021, mandated that small businesses report ownership information. However, as of March 2, 2025, the Treasury Department stated that it will not enforce penalties or fines for businesses that fail to report this information. While the 2024 rule technically remains in effect, businesses should stay informed as the DOL continues its review. Employers and independent contractors alike should consult experts to navigate classification decisions carefully.

Click here to find the official May 2025 guidance from the U.S. Department of Labor (https://www.dol.gov/newsroom/releases/whd/whd20250501)