On May 1, 2025, the U.S. Department of Labor (DOL) issued a field assistance bulletin stating it intends not to enforce its 2024 independent contractor rule while the agency reconsiders it, including whether to rescind it altogether. Similarly, the DOL recently indicated that it may also reconsider its 2024 overtime rule, which was vacated last year pending an ongoing legal challenge.
Federal Independent Contractor Rule
As previously reported, on January 10, 2024, the DOL — under the Biden administration — issued its final independent contractor rule, adopting a “totality of the circumstances” test weighing the six key factors to determine whether a worker is an independent contractor or an employee, which replaced the previous independent contractor rule published under President Trump’s first term.
With the recent federal administration changes, federal policy has significantly shifted through executive and agency actions, so it’s not surprising to see the DOL change its position on the Biden-era independent contractor rule. The recent field assistance bulletin points to the existing legal challenges to the 2024 rule and the position the DOL has taken in those lawsuits, which is that it’s reconsidering the rule, including potentially rescinding it.
Consistent with that position, the DOL will not analyze worker status under the 2024 rule and will instead make the determination in accordance with the 2008 version of Fact Sheet #13 and the reinstated Opinion Letter FLSA2019-6 addressing virtual marketplace companies.
Employers operating outside of California should review both Fact Sheet #13 and the Opinion Letter and should consult their legal counsel with any worker classification questions.
For companies employing workers in California, the DOL enforcement shift doesn’t alter their approach to classifying workers as employees or independent contractors because California adheres to a stricter test for determining employment status, which presumes an individual is an employee unless the hiring entity demonstrates each of the following criteria:
- That the worker is free from control and direction of the hiring entity in connection with the performance of the work;
- That the worker performs work that is outside the usual course of the hiring entity’s business; and
- That the worker is engaged in an independent business of the same nature as the work performed for the hiring entity.
Federal Overtime Rule
Similarly, the DOL’s recent court filings indicate it will reconsider its 2024 overtime rule, potentially withdrawing it entirely.
As previously reported, on April 26, 2024, the DOL published its final rule expanding overtime eligibility by establishing a new weekly salary threshold for exempt employees, which would have taken effect on July 1, 2024. The rule was challenged in court, however, and, in November 2024, the U.S. District Court for the Eastern District of Texas concluded that the rule exceeded the DOL’s authority under the Fair Labor Standards Act (FLSA) and, therefore, must be set aside and vacated, reverting salary thresholds to the levels set by the 2019 overtime rule.
The DOL appealed the decision to the Fifth Circuit Court of Appeals where litigation is ongoing. The DOL, however, recently filed a motion to pause its appeal, indicating that, due to the recent change in federal administration, the department intends to reconsider the rule.
As with the federal independent contractor rule, these developments don’t change California employers’ current obligations. California’s white-collar exemption salary threshold is different than the FLSA, and California law doesn’t have a “highly compensated” employee exemption standard. California employers should continue to apply California’s exemption standards, which requires employers to pay two times the current applicable statewide minimum wage, which is higher than the FLSA salary threshold.
James W. Ward, J.D., Employment Law Subject Matter Expert/Legal Writer and Editor, CalChamber
CalChamber members can read more about Independent Contractors and Understanding Basic Overtime Requirements in the HR Library. Not a member? See how CalChamber can help you.
