The U.S. Department of Labor and the National Labor Relations Board announced on Mar. 11 changes to federal worker classification rules, rolling back regulations from the Biden administration and reinstating standards from the first Trump administration.
These changes are significant for employers and workers, as they aim to clarify when a worker is considered an employee or an independent contractor. The updates are intended to reduce confusion and lower the risk of misclassification, which can lead to financial penalties for businesses.
On Feb. 26, the National Labor Relations Board said it would return to a previous joint-employer standard that focuses on whether an employer shares or codetermines essential terms and conditions of employment with another employer. Under this rule, joint employer status depends on whether an employer possesses and exercises substantial direct and immediate control over key aspects such as wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction. The board said this approach offers greater clarity for employers.
The Department of Labor also proposed a new rule clarifying how independent contractors are classified under the Fair Labor Standards Act. The proposal centers on whether a worker is economically dependent on the employer by evaluating five factors: control over work; opportunity for profit or loss; amount of skill required; permanence of working relationship; and whether the work is part of an integrated unit of production. For example, if a worker controls their schedule or can earn profits based on their own initiative, they may be considered an independent contractor.
For the first time, the Department's proposed rule would apply this analysis not only under wage-and-hour law but also under other federal laws such as the Family and Medical Leave Act.
Employers seeking more information about these updates are encouraged to review official resources or contact relevant legal centers.
