05/21/2025

DOL Pauses Enforcement of Independent Contractor Rule

What this means for you

The U.S. Department of Labor (DOL) recently paused enforcement of the 2024 independent contractor rule and has reverted to earlier guidance that applies the "economic realities" test. This approach focuses on whether a worker is truly operating as an independent business or is economically dependent on the employer—an important distinction that affects tax treatment, compliance, and liability.

While this shift may simplify classification for some businesses, it also creates inconsistencies between federal and state standards. For organizations operating in multiple jurisdictions or working with a flexible labor force, now is a critical time to reassess contractor relationships.

Many professionals are closely monitoring these regulatory changes. Organizations are encouraged to:

• Review and update current independent contractor agreements
• Evaluate classification practices using the reinstated federal criteria
• Prepare for potential future rule revisions

If your organization engages independent contractors, work with your CPA to conduct a proactive review of your current practices to reduce risk and ensure compliance.