DOL Moves to Rescind 2024 Independent Contractor Rule Amid Legal Challenges 

The Department of Labor (DOL) announced it will replace the current Independent Contractor Rule, which had governed how workers are classified under the Fair Labor Standards Act (FLSA). The rule, issued in 2024 under President Joe Biden, is now listed in the “proposed rule stage,” according to the agency’s September 5 regulatory agenda. 

“The 2024 IC Rule is the subject of five separate legal challenges,” the agenda stated. “The Department intends to rescind the 2024 IC Rule and is considering how it will proceed with respect to independent contractor classification under the FLSA.” 

The Biden-era rule made it easier for workers to be treated as employees rather than independent contractors, applying a six-factor test covering profit and loss, financial stake, permanence of the work relationship, degree of employer control, essential nature of the work, and the worker’s skill and initiative. Employees receive protections under federal law—including minimum wage, overtime pay, and workplace safety standards—that contractors do not. 

The 2024 rule drew pushback from industries that rely heavily on independent contractor arrangements, including segments of the financial advisory space. In May, the DOL said it would cease enforcement of the rule and revert to the pre-2024 framework, which uses an “economic reality” test focused on the substance of the relationship rather than technical labels. 

The forthcoming replacement will aim to clarify how employers must distinguish true independent contractors from employees entitled to FLSA protections, a classification debate with broad implications for U.S. labor markets.