DOL Won't Enforce New Standards to Determine Whether Workers Are Employees or Independent Contractors

By Elizabeth E. Hogue, Esq.
 
The U.S. Department of Labor (DOL) has announced that it will no longer enforce a rule published in 2024 that have been used to decide whether workers are employees or independent contractors. This means that while the DOL develops new standards it will no longer apply the analysis in the 2024 rule when investigating potential misclassification of workers as independent contractors instead of employees. This decision is due, in part, to legal challenges to the rule. The classification of workers as either employees or independent contractors has been an important issue for providers of services in patients’/clients’ homes, especially for private duty or homecare providers. 

​The rule that the DOL finalized in 2024 focused on the “totality of the circumstances” to determine whether workers were independent contractors or employees under the Fair Labor Standards Act. It considered factors like:
 

• Opportunity for profit or loss depending on managerial skill: Facts to be considered include whether workers can negotiate charges for services provided; accept or decline work; choose the order or time when services are performed; engage in marketing or advertising activities; and make decisions about hiring others, purchasing material and equipment and/or renting space.
• Investment by workers and employers: Workers’ investments are not necessarily equal to investments by employers, but workers’ investments should support an independent business or serve a business-like function.
• Degree of permanence of the work relationship: If work is indefinite or continuous, the worker is likely an employee.
• Nature and degree of control: The more control exercised by employers, the more likely it is that workers are classified as employees. Evaluation of this factor is influenced by work scheduling, supervision, and limitations on the ability of workers to serve others.
• Extent to which the work performed is an integral part of employers’ business: The more integral the activities, the more likely it is that workers will be classified as employees.
• Skill and initiative: The more specialized the skills, the more likely that workers will be classified as independent contractors.

 
This rule certainly made it harder to classify workers as independent contractors and was difficult to apply.
 
Although the DOL says it will stop enforcement action, providers must be aware that the rule is still in effect. Providers should remain cautious about how workers are classified. Providers must also continue to comply with applicable state and local laws.
 
Classification of employees will continue to be a balancing process. Opinions, especially between business owners and regulators, will undoubtedly continue to differ. In any event, this classification of workers remains an important issue for providers of services in patients’ homes.
 
Copyright 2025 Elizabeth E. Hogue, Esq. All rights reserved.