The GigReporter

On May 1^st the United States Department of Labor issued guidance[1] directing agency investigators enforcing the Fair Labor Standards Act (FLSA) not to apply the classification rules the agency tried to bring in effect in 2024. This means the DOL will be using a less stringent test in its assessments, which may be helpful to some businesses.

There has long been a tug-of-war between presidential administrations over independent contractor rules. Federal courts applying the FLSA have set forth an economic realities test that is sufficiently vague there is substantial room for regulators to expand on it; Republican administrations have tried to put forth a rule that provides greater weight to two “core” factors of the economic realities test, the degree of control and the opportunity for profit and loss, while deemphasizing other factors and discounting reserved, unexercised control and control exercised pursuant to legal compliance, while Democratic administrations have tried to reverse that rule. While litigation and formal rulemaking play out the DOL is cutting to the chase and instructing staff to revert to the Republican version of the test.

This is all well and good for businesses facing federal wage and hour investigations, but most SCI clients should bear in mind they’re probably too small to be targeted by those and have more to worry about from private litigants. This guidance, and even the formal rulemaking process that is currently ongoing, will have limited effects on the judges overseeing such cases, especially after the Loper-Brigh Enterprises v. Raimondo Supreme Court decision that challenged the judicial doctrine of deference toward agency interpretations of statutes.  Federal judges may feel less pressure to adhere to the DOL’s interpretation if they find it ambiguous.

[1] https://www.dol.gov/newsroom/releases/whd/whd20250501