The Department of Labor is preparing to repeal its 2024 rule on independent contractor classification. That decision could once again change how you determine whether someone on your jobsite is an employee on your payroll or an independent contractor working under their own business.
Another Swing of the Pendulum
Does all this sound familiar? This issue has been going back and forth with each administration change.
The 2024 rule under the Biden administration replaced a Trump-era approach. Biden’s version took effect in March 2024 but quickly faced five separate legal challenges. Now, just over a year later, the Department is signaling a repeal.
The rule currently on the books uses a “totality of the circumstances” test. That means you weigh six factors when deciding if a worker is your employee:
- Their opportunity for profit or loss
- The investments they’ve made compared to yours
- How permanent the work relationship looks
- How much control you have over the work
- Whether the work is central to your business
- The skill and initiative the worker brings
By comparison, the earlier Trump-era rule focused mostly on just two factors: how much control the worker had over their tasks and whether they could make or lose money.
The Department hasn’t said what the next rule will look like. Its agenda suggests a new proposal will come later this month, but the timeline for review and finalization could stretch out for years.
Why Contractors Should Watching Closely
Construction groups pushed back hard against the 2024 rule because it blurred the line between subcontractors and employees. For contractors, that rule raised the risk of losing flexibility, adding costs, and taking on new liabilities for workers who had traditionally been treated as independent. Now those groups are applauding the Department’s move toward repeal.
Brian Turmail, vice president of public affairs and workforce at AGC, said the repeal was no surprise. “We had anticipated this move and expect a future rule to make compliance and the lines for determining status clearer for employers.” He added that contractors need a rule that preserves the legitimate use of independent contractors on jobsites.
The reasoning is straightforward. Independent contractors often handle specialized trades, making it possible for you to staff up quickly when a project calls for niche skills. They also give you flexibility when work ramps up or slows down, without forcing you to add or cut permanent payroll. And because they operate as separate businesses, they carry their own risks and responsibilities.
If more of those workers get reclassified as employees, the equation changes. You would be responsible for benefits, payroll taxes, overtime, and compliance requirements. That adds cost and limits flexibility. It’s why industry groups are pushing for a rule that makes the line between contractor and employee clear and consistent across the board.
What You Need to Do Now
For the moment, nothing changes in how you classify your workforce. The Department stopped enforcing the 2024 rule in May, but until a new one is finalized, you still have to rely on the existing criteria.
Keep in mind: the last rule took nearly two years to move from proposal to enforcement. That means you’re looking at a long road before a new version lands, but the direction of travel is clear.
Here’s what matters for you right now:
- Stay informed. Follow the Department’s next proposal closely.
- Review your current classifications. Make sure you’re documenting why someone is treated as a sub versus an employee.
- Talk to your team. Your supervisors, payroll staff, and project managers all need to understand the boundaries when working with independent contractors.
The question of contractor versus employee won’t go away. How you answer it could reshape your workforce and the way you run your business in the years ahead.
