On May 1, 2025, the U.S. Department of Labor (“DOL”) released a Field Assistance Bulletin that provides guidance regarding the analysis to apply when determining employee or independent contractor status for purposes of enforcing the Fair Labor Standards Act (“FLSA”). The DOL announced that it will no longer apply the 2024 independent contractor rule and will enforce the FLSA in accordance with Fact Sheet #13 (July 2008).
Pursuant to Fact Sheet #13, whether a worker is an employee or an independent contractor under the FLSA is determined by looking at the economic realities of the worker’s relationship with the employer. In the application of the FLSA an employee, as distinguished from a person who is engaged in a business of his or her own, is one who, as a matter of economic reality, follows the usual path of an employee and is dependent on the business which he or she serves. The employer-employee relationship under the FLSA is tested by “economic reality” rather than “technical concepts.”
The U.S. Supreme Court has indicated that there is no single rule or test for determining whether an individual is an independent contractor or an employee for purposes of the FLSA. The Court has held that it is the total activity or situation which controls. Among the factors which the Court has considered significant are:
1. The extent to which the services rendered are an integral part of the principal’s business.
2. The permanency of the relationship.
3. The amount of the alleged contractor’s investment in facilities and equipment.
4. The nature and degree of control by the principal.
5. The alleged contractor’s opportunities for profit and loss.
6. The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor.
7. The degree of independent business organization and operation.
Employers should review their practices and evaluate their independent contractors’ status to ensure they are properly classified. Should you have any questions, please contact Ali Law Group.
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