DOL Releases New Independent Contractor Rule

The Trump Department of Labor released a new, more employer-friendly worker classification rule to replace the stricter Biden-era standard.

Why it matters: The new rule makes it easier for companies to classify workers as contractors and provides a much clearer standard for all stakeholders.

Background: This is the fifth straight administration to issue its own independent contractor rule, as the standard for determining worker classification has ping ponged back and forth for over two decades.

• The first Trump administration proposed a new rule that was later withdrawn by the Biden administration before it ever went into effect.
• The Biden administration then issued its own, much stricter rule based on at least six, vaguely-defined factors that largely left employers in the dark.
• The current administration quickly moved to freeze and then rescind the Biden-era rule and replace it with its own.

New rule – simpler, more employer-friendly: The new proposed rule largely resembles the first Trump administration’s standard and is based on longstanding worker classification principles and a two-factor “economic realities” test.

• Under the new rule, the primary focus is on whether the worker is “economically dependent” on the employer for work. If so, the worker is an employee. If not, the worker is an independent contractor.
• Specifically, the test is based on two “core” factors: (1) how much control the worker has over their work, and (2) the worker’s opportunity for profit or loss, and three additional factors “that may serve as additional guideposts” – skill, permanence, and whether the work is part of an integrated unit of production.
• The new rule also clarifies that the company’s and worker’s “actual practice” is more relevant than what may be contractually or theoretically possible.

The bottom line: The new rule simplifies worker classification and makes it much easier to classify a worker as an independent contractor.

• The main focus is on whether the company or the worker has more control over the work and the worker’s opportunity for profit or loss.
• Unlike the Biden-era rule, which considered theoretical or potential control, the new proposed rule is based on control actually exercised by either party.

What’s next: The proposed rule will be open for public comment until April 28^th. The CHRO Association – which supported the first Trump rule and opposed the Biden-era rule – will be submitting comments. Please reach out to ghoff@chro.org if you would like to provide input for the Association’s comments. A final rule is likely to be issued in late 2026 or 2027.