Recent changes and what businesses need to know
Background on the Rule
The 2024 rule aimed to tighten restrictions on who could be classified as an independent contractor, making it harder for companies to avoid providing benefits and workplace protections. It introduced a more complex “economic reality” test, requiring employers to weigh factors such as:
- Control over work schedule
- Permanency of employment
- Integration of work into the company’s core operations.
2025 Approach
The Department of Labor has recently announced that it has opted to pause enforcement rather than formally rescind the rule. The department clarified that this decision does not change existing regulations but instead reflects how enforcement resources are being allocated during the review process. Many speculate that this move could lead to either a new rule or a full rescission of the 2024 regulation. View Factsheet here for more details.
Impact on Small Businesses
In addition to the independent contractor rule, the Treasury Department has also announced a pause on enforcement of a Corporate Transparency Act requirement. This rule, passed in 2021, mandated that small businesses report ownership information. However, as of March 2, 2025, the Treasury Department stated that it will not enforce penalties or fines for businesses that fail to report this information. While the 2024 rule technically remains in effect, businesses should stay informed as the DOL continues its review. Employers and independent contractors alike should consult experts to navigate classification decisions carefully.
Click here to find the official May 2025 guidance from the U.S. Department of Labor.
