From Mondaq, Blake Cantrell provides a terrific guide to independent contractor classification. Blake writes:
Engaging independent contractors can bring cost savings, agility, and specialized expertise to businesses of any size. However, misclassification of an employee as an independent contractor exposes companies to back-pay liabilities, penalties, and reputational harm.
Compounding the risk of misclassification, ongoing changes to contractor classification rules at the federal level continue to create ambiguity and uncertainty for employers. In 2024, the US Department of Labor (DOL) issued new rules and guidance on how the agency would analyze who is an employee or independent contractor under the Fair Labor Standards Act (FLSA), marking a dramatic shift from the previous DOL approach.
Following these changes, there have been numerous high-profile lawsuits and coordinated audits by regulatory agencies. As a result of these lawsuits, the DOL appears to have completely reversed its aggressive enforcement approach to the 2024 rules. In May of 2025, the DOL released Field Assistance Bulletin 2025-1, advising field agents in the Wage and Hour Division that DOL is now “reconsidering the 2024 Rule, including whether to rescind the regulation”, and “will no longer apply the 2024 Rule’s analysis when determining employee versus independent contractor status”. Clearly, these rapid changes continue to push contractor classification issues to the forefront of labor and tax compliance, further reinforcing how critical it is for business owners to stay informed.
Although the landscape on this subject continues to shift, this guide aims to provide general guidance and a clear framework for employers when distinguishing contractors from employees in their workforce. Additionally, this guide offers practical tips for agreement drafting, mitigation strategies for compliance risks, and guidance on leveraging the Section 530 Safe Harbor when appropriate.
What Is an Independent Contractor?
An “independent contractor” is generally a self‑employed individual (or business entity) that sets fees, controls work methods, and bears the financial consequences of profit or loss rather than receiving wages and benefits. Contractors ordinarily provide services to multiple customers, furnish tools or equipment, and remit their own taxes.
Read the full story at Independent Contractor Classification: A Comprehensive Guide – Employee Benefits & Compensation – United States