DOL WHD Guidance on FLSA Independent Contractor Enforcement

U.S De p ar tme n t of Labor W a ge a nd H our D ivi si on 1 May 1, 202 5 Field Assistance Bulletin No. 202 5-1 MEMORANDUM FOR: R e gional Administrators Dist ric t Dire ct ors FR OM: Do nald M. Harriso n, I I I A ctin g A d min is t ra t o r S U BJ EC T: FLSA Indepe ndent Contra c t or Mi sclassif i ca t i on E nforceme nt G ui da nce This Field Assistance B ulleti n provides g uidance t o W HD field staff r egarding t he a nalysis to a pply when determining e mployee o r i ndependent c ontractor s tatus f or pur poses o f e nforcing t he FL SA. Background A num ber o f l awsuits a re pending i n federal c ourts challenging the l egality of t he r ule e ntitled Employee o r I ndependent C ontractor C lassificatio n Under t he Fa ir Labor St andards Act, 8 9 Fed. R eg. 1638, (“ 2024 Rul e ”), w hich outlin e d t he f ram e w ork f or d e t e rm ining e mployee o r i ndependent contractor status under t he FL SA. T he D epartment ha s t aken the po sition in those l awsuits that i t is reconsidering t he 2 024 Rule, i ncluding whether t o r escind the r egulation. Spe cifically, WHD is currently reviewing a nd developing t he a ppropriate s tandard for determining FL SA e mployee v ersus independent c ontractor s tatus. Enforcement G uidance Consistent w ith the D epartment’s po sition on the 2 024 Rule e xpressed in the a bove -r eferen c ed litigation, WHD w ill no lo ng e r a pply the 2 024 Rul e ’s a nalysis wh e n d e t e rmining e mploy e e v e rsus independent c ontractor s tatus i n FLSA i nvestigations. WHD will enforce t he FL SA i n accordance with Fac t Sheet #13 (July 2008) *, and as further i nformed by Opinion Letter FLS A 2019 -6 with r espect to a ny matters f or whic h no pa yment ha s be en made, di rectly t o i ndividuals or to D OL, for ba ck wages a nd/ or c ivil money pe nalties a s o f May 1, 2025. The D epartment r eserves i ts r i ght t o exer c i se i ts e nfor c ement a uthor i ty i n s pe c i f i c m atters exp li c i t l y deemed appropriate by t he A dministrator, o r de signee, a s a n appropriate allocatio n of r esources.

2 T he gui da nc e i n thi s FA B supersede s any c ontr a r y or c onfl i ct i ng gui da nc e to f i el d sta ff addr e s si ng thi s t o p ic. Unti l f urt he r a c ti on i s ta ken, the 2 0 2 4 R ul e r e ma i ns in ef f e c t for pur poses of pri vate li ti g a ti on and nothi ng i n t hi s FAB c hanges the r i g hts of e mpl oy e e s or r es ponsi bil i ti e s of e mpl oy e r s unde r the FLSA, s ee F a c t S h e e t # 13 (M ar c h 2024). * F a c t S h e e t # 13 (J u l y 2008) Fac t S he et #1 3: E mploy m e nt R elat ions hip U nde r t he Fair L abor S t andar ds A c t (FL S A) T his f ac t shee t pro vide s gene r al infor m at ion c onc e r ning t he m e aning of " e m ployme nt r e lationship" and t he signif ic ance of that de t e r minat ion in apply ing pr ovisi ons of t he FLSA. Char ac t e r is t ic s An e mplo yme nt r e lat ions hip unde r t he FLSA must be dist inguishe d from a str ic t ly c ont r ac t ual one. Such a r e lat ionship must e xist for any pr ovision of the F LSA t o apply t o any per son e ngage d in w or k which m ay ot he r w ise be s ubj e c t t o t he Ac t. I n t he applic at ion o f t he FLSA an e m ploye e, as dis t inguished fr om a pe rson who is e ngage d in a busine ss of his or he r ow n, is one w ho, as a mat t e r of e c onom ic r e alit y, f ollows t he usual pat h of an e mploye e and is de pe nde nt on t he business whic h he or she se r ve s. T he e mplo ye r - em p lo y ee r e lat ionship unde r t he FLSA is t e st e d by " e conomic r e ality" rat he r t han " t e c hnic al c onc e pt s. " I t is not de t e r m ine d by t he c om mon law st andar ds re lating t o mas t e r and se r vant. T he U. S. Supr e me Cour t has on a numbe r of oc c asions indic at e d t hat t he r e is no s ingle r ule or t e st for de t e r m ining whe t her an individual is an inde pe nde nt cont r ac t o r o r an e mploye e for pur poses of t he FLSA. The Court has he ld t hat it is t he t otal ac t ivi t y or situat ion whic h c ont r ols. Among t he fact ors whic h t he Cour t has c onsider e d s ignificant ar e: 1) T he e x t e nt t o whic h t he se r vice s re nde re d are an inte gral par t of t he princ ipal's business. 2) T he pe r m ane nc y of t he r e lat ionship. 3) T he amount of the allege d cont r ac t or's inve stm e nt in fac ilit ie s and e quipme nt. 4) T he nat ur e and degr e e of c ont r ol by t he pr inc ipal. 5) T he alle ge d c ont rac t or ' s opport unit ies for pr ofit and loss. 6) T he amount of initiat ive, judgme nt, or fore s ight in ope n mar ke t c om pe t it ion w it h ot he r s r e quir e d for t he succ e ss of t he c laime d indepe ndent cont rac t or.

3 7) T he de gr e e o f i nde pende nt bus ine ss o rganiz at ion and ope r at ion. T he r e ar e c e r t ain fac t or s w hic h ar e i mmat e rial i n de t er m ining whe t her t he r e i s an e mployme nt r e lat ions hip. Such fac t s as t he place w he r e w or k i s pe r for m e d, t he abs e nc e o f a form al e mployme nt agr e e me nt, o r w he t he r an alle ge d inde pe ndent c ont rac t or i s l ic e ns e d by S t at e /local go ve r nme nt ar e no t c onside r e d t o hav e a be ar ing on de t e r m inat ions as t o w he t he r t he r e i s an e mployme nt r e latio ns hip. A ddit ionally, t he S upr e me C our t has he ld t hat t he t ime o r m ode o f pay do e s no t c ont rol t he de te rm inat ion of e mploye e s t at u s. Req u i rem en ts W hen it has be en de te rm ine d t hat an e m ploye r - em ploye e r e lat ionship doe s e xist, and t he e m ploye e i s e ngage d in wor k t hat i s s ubje c t t o t he A c t, i t i s r e quire d t hat t he e mploye e be pai d at l e ast t he F e de r al m inim um w age of $5. 85 pe r h our e ffec t ive J uly 24, 2007; $6. 55 per h our e ff e ct ive J uly 24, 2008; a nd $7. 25 per h our e ff e ct ive July 2 4, 2 009, and in most c ases o vertime at t ime and one -h alf hi s/her r egular r ate o f pay f or al l ho urs w orked in e xcess o f 4 0 pe r w eek. T he A ct al so has y outh employment pr ovisions w hich regulate t he e mployment of m inors under t he age o f e ighteen, as w ell as r ecord -k eeping requirements. T y pic al P r oble ms (1) One o f t he m ost c om mon pr oble m s i s i n t he c onst ruc t ion indus t r y w he r e c ont rac t or s hi r e s o - calle d inde pe nde nt c ont rac t or s, w ho i n r e alit y s houl d be conside r e d e m ploye e s be c ause t he y do not m e e t t he t est s for inde pe nde nc e, as s t at e d above. (2) F r anc hise ar r ange m e nt s c an pose pr oble ms i n t his ar e a as w e ll. D e pending on t he l e ve l o f c ont rol t he f r anc hisor has o ve r t he f r anc hisee, e m ploye e s o f t he l at te r m ay be c onside r e d t o be e mploye d by t he f ranc hisor. (3) A s it uat ion involvi ng a pe r son volunt e e r ing his o r he r s e r vice s f or ano the r m ay also re sult i n an e mployme nt r e lat ions hip. F or e x ample, a pe r son who i s an e m ploye e c annot " volunt e er " h i s / h er s erv i ces t o t h e e mp l o y er t o p erf o rm t h e s a me t y p e o f s erv i ce p erf o rmed a s a n e m p lo y ee. O f c o u rs e, individuals may v olunt e e r o r do nate t he ir s e r vic e s t o r e ligious, publ ic s er vic e, and non - pr ofit o r ganiz at ions, wit hout c ont em plat ion of pay, and not be c onside r e d e mploye e s o f s uch o rganiz at ion. (4) T r aine e s o r s t ude nt s may al so be e mploye e s, de pe nding on t he c ir c um s t anc e s o f t he ir ac t ivit ie s f o r t h e e m p lo y er. (5) P eo p l e w h o pe r for m w or k at t he ir o wn home ar e o ft e n im pr ope r ly c onside re d as i nde pe nde nt c ont r ac t or s. T he A c t c ove r s such home wor ker s as e mploye e s, and t he y ar e e nt it le d t o al l be ne fit s o f t he l aw.