Trump administration reverses Biden-era independent contractor rule

The Department of Labor has paused enforcement of a Biden-era rule that narrowed the definition of who qualifies as an independent contractor, delivering a significant win to business groups, as flagged by the Washington Business Journal. The rule, finalized in March 2024, targeted misclassification of workers by requiring companies to use a broader “economic reality” test when determining employment status.

The pause does not eliminate the rule itself, which remains in effect for the purposes of private litigation. However, the department confirmed it is shifting enforcement back to so-called Fact Sheet 13, a simpler, pre-2024 standard from the Trump administration. While this change does not officially alter the regulation, it effectively reverts enforcement to that of the previous administration.

Business groups have welcomed the move. Kristen Swearingen of the Associated Builders and Contractors (ABC) said the 2024 rule was “vague and unworkable” and would reduce opportunities for construction workers. ABC has an active lawsuit challenging the Biden-era regulation.

Similarly, the Independent Women’s Forum called the pause “a big win,” citing the importance of flexible work options for women managing caregiving and health-related responsibilities. “The Biden administration blatantly ignored the public outcry over its rule,” said Patrice Onwuka, director at the forum’s Center for Economic Opportunity.

Legal experts note that employers still face a complex patchwork of state and local worker classification laws, and litigation under the federal rule is ongoing. In a blog post, Littler Mendelssohn urged companies to stay compliant with all applicable standards while the review unfolds.

The contractor rule is just one of several Biden-era policies now on hold. The Trump administration has also suspended enforcement of the Corporate Transparency Act’s small business ownership disclosure requirement and reversed regulations governing SBA loan underwriting.