FLSA
Earlier today, the U.S. Department of Labor (“DOL”) announced a proposed rule intended to provide greater clarity for both workers and employers on how to determine whether a worker should be classified as an independent contractor or an employee under the Fair Labor Standards Act (“FLSA”) and other related laws.
Issued on February 26, 2026, the proposal – titled “Employee or Independent Contractor Status Under the Fair Labor Standards Act, Family and Medical Leave Act, and Migrant and Seasonal Agricultural Worker Protection Act” – would rescind the Biden era rule (the “2024 Rule”) and replace it with a framework very similar to what we saw adopted in 2021 during the first Trump administration (the “2021 Rule”).
Level One: Ancient Origins
Under the FLSA, the central question in determining worker classification is whether the individual is economically dependent on the operation, indicating employee status, or is truly “in business for themselves,” which supports independent contractor status. This distinction matters because workers classified as employees are entitled to FLSA protections, including minimum wage and overtime requirements.
While agricultural employers may benefit from certain exemptions under the FLSA, the analysis does not end there. Many state labor laws look to the FLSA’s definition of “employee” when deciding whether their own wage and hour protections apply. In some cases, state laws impose broader requirements and offer greater protections than federal law. Independent contractors, by contrast, are not covered by FLSA wage and hour protections and generally exempt from state labor law requirements.
Classification of a worker is vitally important because misclassification can come with harsh consequences. If misclassification is discovered, whether through a DOL investigation, a worker complaint, or a lawsuit, the employer may be required to pay back wages, civil money penalties imposed by the DOL, and any attorneys’ fees and court costs should the matter end up in litigation. Beyond wage-and-hour issues, misclassification can trigger additional liability under other federal and state laws. This might include civil claims for unpaid payroll taxes, unemployment insurance contributions, or workers’ compensation violations, as well as potential criminal penalties in extreme cases of willful or repeated noncompliance.
Level Two: Trial by Fire
As originally enacted, the FLSA does not lay out a precise test for distinguishing an employee from an independent contractor. Over time, the DOL looked to the courts to develop a workable standard for making such determinations. Through those decisions, the “economic realities test” emerged and became the framework for evaluating whether a worker should be classified as an employee or independent contractor.
The economic realities test is a “totality of the circumstances” approach, meaning that no single factor controls the outcome. Instead, all relevant factors must be considered and weighed together to assess the true nature of the working relationship. Those factors include:
- The nature and degree of control;
- The individual’s opportunity for profit or loss;
- The permanency of the work relationship;
- Whether the work being performed is an integral part of the employer’s business;
- The worker’s investment in facilities and equipment; and
- Skill and initiative.
For decades courts and the DOL have applied these factors, or slight variations of them, to determine worker status under the FLSA. Over time, however, application of the test varied across jurisdictions, with some courts placing greater emphasis on certain factors than others. This inconsistency led to differing and inconsistent interpretations of worker classification around the country.
Level Three: The 2021 Rulebook Rewrite
In 2021, the DOL attempted to address the inconsistent and often subjective application of the economic realities test by issuing a formal independent contractor rule. This 2021 Rule marked the agency’s first effort to create a more standardized framework for distinguishing between employees and independent contractors.
The 2021 Rule used a variation of the economic realities test but explicitly gave greater probative value to “two core factors.” The two core factors are:
- The nature and degree of control over the work; and
- The individual’s opportunity for profit or loss.
The Department did not eliminate the other factors of the economic realities test; those factors remained part of the analytical framework under the 2021 Rule. However, the DOL did determine that the two “core factors” carried the most weight when determining whether an individual is economically dependent on an employer. The DOL further explained that when both core factors pointed toward the same classification, there was a “substantial likelihood” that the resulting classification was the correct classification.
Level Four: The 2024 Reset
In early 2024, the DOL published another rule, repealing the 2021 Rule and reverting back to a totality of the circumstances analysis of the economic realities test in which there are no core factors, and all factors are weighed evenly. The 2024 Rule went into effect on March 11, 2024.
Level Five: 2026 Counterattack
The latest proposed rule would reinstate the framework of the 2021 Rule, with several targeted adjustments designed to provide clearer guidance and promote more consistent interpretation/application of the test. The stated goal is to reduce uncertainty and, in turn, lower the risk of misclassification claims or enforcement actions that can disrupt day-to-day operations.
In addition to reinstating and slightly modifying the 2021 Rule, the proposal would also apply the independent contractor analysis to the Family and Medical Leave Act (“FMLA”) and the Migrant and Seasonal Agricultural Worker Protection Act (“MSPA”), each relying on the FLSA’s definition of “employ.”
In its proposal, the DOL explained that the 2024 Rule failed “to provide effective guidance on how different factors in its multi-factor balancing test should be weighed or applied together.” The DOL contends that it’s two core factor economic realities test is just a result of decades and decades of case law. The Department indicates that after reviewing numerous judicial decisions, “the Department determined that courts tended to focus on two economic reality factors – control and the opportunity for profit or loss.” Thus, the DOL determined that in effect, judges were giving greater weight to these two factors to determine a worker’s classification under the FLSA.
However, the DOL emphasizes that even when the two core factors point toward the same classification they are not “controlling.” Their combined weight may still be outweighed by other considerations, making it “necessary to consider both [core and non-core] factors.” In short, the test that the DOL seeks to readopt is not intended to be applied “in a mechanical way that precludes consideration of all relevant facts and factors.”
Some other modifications proposed by this new rule include:
- Clarification on how an employee’s economic dependence on an employer differs from the relationship between independent businesses working together.
- Highlighting that worker classification hinges on dependence for the work, not on how much money the worker makes.
- Modifying the real-world examples used to apply the proposed 2026 framework to avoid potential ambiguity in the law; and
- Emphasis on the fact that the actual practice of the worker and potential employer is more relevant than what may be contractually or theoretically possible.
You can read the proposed rule here.
Boss Level Unlocked: Power Up with Public Comment
Ever wished you could help shape the rulebook? Well, now’s your chance!
The proposed rule kicks off a 60-day public comment period, closing April 28, 2026. You can submit a comment on the proposed rule to help provide greater clarity or protections for your specific industry or area of interest.
You might be wondering, “Can my comment really make a difference?” The answer: absolutely! Agencies are required to consider all substantive comments, and those that are unique, evidence-based, and grounded in real-world experiences are far more likely to influence the final rule than generic statements along the lines of “this is good” or “this is bad.”
If you have noticed gaps or issues that the DOL has not addressed in this proposal, now is the perfect time to bring them to light. Don’t miss the opportunity to make your voice heard, you never know, your input could truly change the law!
Comments can be submitted at https://www.regulations.gov (Docket No. WHD-2026-0001). Once comments are closed, the DOL will review and consider those comments, make any final modifications, and publish the final rule.
As always, as we learn more about this proposed rule and any final rule, we will keep you up to date.
Tags: FLSA, Independent Contractor, Department of Labor, DOL, Fair Labor Standards Act, Employee, Worker Classification
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The classification of workers as either independent contractors or employees has once again become a focal point of federal labor policy, reflecting the broader ideological shifts that accompany changes in presidential administrations. With the transition to new leadership in the White House, the U.S. Department of Labor (“DOL”) has issued new guidance that redefines the criteria used to determine worker status. This latest interpretation marks a departure from the 2024 Democratic rule (the “2024 Rule”), instead embracing a model more consistent with prior Republican approaches. The change has significant ripple effects for employers and workers as it influences everything from wage protections to benefits eligibility and legal liability.
On May 1, 2025, the DOL’s Wage and Hour Division (“WHD”) issued Field Assistance Bulletin No. 2025-1(the “2025 Bulletin”), offering updated guidance on how to assess whether a worker qualifies as an employee or independent contractor under the Fair Labor Standards Act (“FLSA”).
The 2025 Bulletin explicitly states that the WHD will no longer apply the analytical framework established by the 2024 Rule when evaluating worker classification under the FLSA. Instead, the WHD will rely on the standards set forth in Fact Sheet #13 (July 2008) and Opinion Letter FLSA2019-6 (referred to as the “2008 Guidance” and “2019 Guidance,” respectively). However, the 2025 Bulletin clarifies that the 2024 Rule remains applicable in the context of private litigation.
The History of the Independent Contractor Revolving Door
The 2025 Guidance marks the latest development in a long-running pattern of revolving labor policy, reflecting the political priorities of successive presidential administrations. The 2024 Rule had previously replaced the Trump Administration’s 2021 Rule (the “2021 Rule”), which aimed to simplify the employee-versus-independent contractor analysis under the FLSA. The 2021 Rule emphasized two “core factors” of the traditional multifactor economic realities test: (1) the nature and degree of control over the work, and (2) the worker’s opportunity for profit or loss. By prioritizing these elements, the Trump-era rule created a more employer-friendly framework that often favored independent contractor classification.
The 2024 Rule reinstated the “totality of the circumstances” approach to the economic realities test, treating all factors with equal weight rather than prioritizing any single one. By doing so, the WHD assessed worker classification by holistically evaluating all six factors of the test. This broader, more balanced analysis often leaned toward classifying workers as employees, particularly in cases where multiple factors pointed to economic dependence on the employer.
While the Trump Administration previously issued a rule emphasizing a two “core factors” approach to worker classification, neither the 2025 Bulletin nor the 2008 and 2019 Guidance documents it references adopt that framework explicitly. Instead, the 2025 Bulletin affirms the DOL’s departure from the Biden-era 2024 Rule and suggests that additional rulemaking may be forthcoming, signaling continued evolution in the DOL’s enforcement strategy.
DOL Enforcement v. Private Litigation
It’s essential to understand the scope of the 2025 Bulletin’s applicability. As previously discussed, the 2025 Bulletin eliminates the use of the 2024 Rule in WHD investigations and classifications, even though that rule remains effective in private litigation. The distinction between these two contexts – WHD investigations and private lawsuits – centers on who initiates the action, the underlying purpose, and the legal procedures involved.
WHD Investigation
- Initiated by: The U.S. Department of Labor’s Wage and Hour Division
- Purpose: To enforce federal labor laws, such as the FLSA, by ensuring employers comply with minimum wage, overtime, and classification rules.
- Process: WHD investigators may conduct audits, review payroll records, and interview employees. These investigations can be random, complaint-driven, or targeted based on industry trends.
- Outcome: If violations are found, the WHD may seek back wages, penalties, or require changes in employment practices. Employers can settle disputes administratively without going to court.
Private Litigation
- Initiated by: An individual worker or group of workers
- Purpose: To seek compensation for alleged violations of labor laws, such as unpaid wages or misclassification.
- Process: The case is filed in court, and both parties engage in litigation, which may include discovery, motions, and potentially a trial.
- Outcome: A judge or jury determines liability and damages. The court may award back pay, liquidated damages, attorney’s fees, and other relief.
Practical Implications
For private employment matters, employers should continue to follow the 2024 Rule, as it remains the governing standard in litigation. The 2025 Bulletin applies only in the context of WHD investigations. While future rulemaking could align the DOL’s position more closely with the 2021 Rule – potentially establishing a new nationwide standard – it is essential for employers to stay informed about ongoing developments relating to worker classification. Misclassifying a worker, even unintentionally, can lead to significant financial penalties under both federal and state laws and may jeopardize the long-term stability of your business.
(Side note: Adding to the complexity of this situation is the U.S. Supreme Court’s recent decision in Loper Bright Enterprises v. Raimondo, which overturned the Chevron doctrine and could have far-reaching implications for how the DOL approaches worker classification. However, the full impact of that ruling warrants a deeper discussion – one best served for a future blog post.)
For more information on the 2024 Rule and worker classification, check out our previous blog post here.
Tags: FLSA, Independent Contractor, Worker Classification, Employee, labor, employment, Ag Labor
Comments: 0
Agricultural workers are usually categorized in two ways. They are either an “employee” or an “independent contractor.” Depending on how an agricultural worker is labeled determines the duties and liabilities of the agricultural employer.
Generally speaking, if an ag employer has the right to control the work of an ag worker, then the ag worker is probably an employee. This means that the ag employer must abide by a whole host of federal and state laws that relate to labor and employment and can be found liable for any damages caused by their employees under the doctrine of vicarious liability. Vicarious liability is a legal doctrine that may hold an employer responsible for the actions of an employee -- so long as the employee was acting in the ordinary course of business. A good example of the vicarious liability doctrine in action is when a court decides to hold a farmer and/or farm business responsible for any spray drift damages resulting from an employee’s application of herbicide.
On the other hand, ag employers that use independent contractors are usually not liable for any damages that result from the actions of an independent contractor. This obviously makes the use of independent contractors very appealing but comes at a higher cost than using an employee to do the work.
Simple enough right? Be careful with employees and spray drift or use independent contractors and be worry free. Not really. Although a big concern for ag employers are the liability issues that stem from employees’ actions, having employees requires ag employers to fulfill multiple obligations under state and federal labor and employment laws, obligations that otherwise would not exist if an ag employer used an independent contractor to complete the work. Those obligations can include wages, overtime pay, hour restrictions, migrant and seasonal worker protections, tax concerns, and others. So, you see, labeling a worker as an employee or independent contractor goes far beyond just preventing a lawsuit against the ag employer.
Ag employers often think they are using independent contractors to complete work around the farm. But innocently, the ag employer may actually be using an employee to complete work around the farm and is probably violating federal and state law and exposing itself to fines and lawsuits. An ag employer must be careful when determining who is an employee and who is an independent contractor when looking for help on the farm. Below is a brief summary of Ohio and federal law that determine when an ag worker is an employee and when an ag worker is an independent contractor.
How do I determine who is an employee and who is an independent contractor?
The simple answer to that is, it depends. Different tests are used at the federal level and in Ohio. However, one thing that all these tests have in common is the ag employer’s right to control the work being done. This means that if an ag employer can direct, monitor, correct, or otherwise control how the work is being done, then the ag worker is likely an employee. Even if an ag employer never exerts or directly controls how the work is being done, courts only care that the ag employer has or had the ability to do so.
What are the tests to determine if a worker is an employee or independent contractor?
The Economic Realities Test. The Fair Labor Standards Act (“FLSA”) is the federal law that governs minimum wage, overtime pay, recordkeeping, and youth employment standards. “Employee” is defined very broadly under the FLSA and more often than not, a worker is found to be an employee rather than an independent contractor. To help determine who is an employee and who is an independent contractor, the FLSA uses an Economic Realities Test. The Economic Realities Test looks at the reality of the economic relationship between the parties and if a worker is more reliant on the employer for economic gain and security, then the worker is more likely an employee. Factors under this test include:
- The degree of control that an employer can exert over the worker and the work being performed.
- Whether the work being performed is an integral part of the employer’s business.
- The permanency of the relationship.
- The amount of the worker’s investment in facilities and equipment.
- The worker’s opportunities for profit and loss.
- The amount of initiative, judgment, foresight, and skill required for the worker’s success.
The Internal Revenue Service (“IRS”) Standard. The IRS has a separate test to help taxpayers determine whether an individual should be considered an employee or independent contractor for tax purposes. The IRS analyzes three areas – behavioral control, financial control, and the relationship of the parties.
- Behavioral Control – a worker is an employee when the business has the right to direct and control the work performed. Factors include: (a) the type of instructions given; (b) degree of instruction given; (c) evaluation of work done; and (d) training.
- Financial Control – If a business has the right to direct or control the financial and business aspects of the worker’s job, then the worker is likely in employee. A major factor is how the worker is paid. Employees are guaranteed regular pay whereas independent contractors are paid by the job.
- Relationship of parties – the IRS takes into consideration what the parties think their relationship is. The IRS will look at written contracts, whether any benefits are offered, the length and permanency of the relationship, and whether the worker is performing work that is an integral part of the business of the employer.
Ohio’s standard. Ohio uses two separate, yet very similar tests to determine employee or independent contractor status. For wage and hour purposes, Ohio uses the Economic Realities Test that is used by the FLSA.
However, for workers’ compensation, unemployment insurance, and Ohio’s vicarious liability law, Ohio uses a “right to control” test. Under Ohio’s “right to control” test courts consider the following factors:
- Whether the worker is engaged in a distinct occupation or business;
- Whether the worker or the employer supplies the place and tools to complete the work;
- Whether the work is done by a specialist requiring a particular skill;
- How the worker is paid;
- The length of time a worker is employed;
- Whether the work performed is part of the regular business of the employer;
- Whether the employer controls the details and quality of the work to be performed; and
- The terms of any agreements or contracts between the parties.
Why is determining who is an employee and independent contractor important?
First and foremost, determining who is and is not an employee defines an ag employer’s obligations under the law. If an ag employer has employees, then the ag employer must abide by federal and state wage, hour, antidiscrimination, unemployment insurance, workers compensation, and safety laws. Those same obligations do not arise when using an independent contractor.
Secondly, misclassifying a worker as an independent contractor when they are actually an employee can lead to severe legal fines and penalties. Some of the consequences for incorrectly classifying a worker could include:
- Lawsuits for unpaid wages;
- Fines for failing to comply with federal and Ohio antidiscrimination laws;
- Discrimination and wrongful termination claims;
- Lawsuits for the negligence or other civil wrongs of the worker; and
- Fines for failing to maintain Ohio Workers’ Compensation Insurance and Unemployment Insurance.
Conclusion. Determining who is and isn’t an employee defines an ag employer’s legal obligations, so it is always important to ensure that whenever someone is doing work for you, you categorize them correctly. If you have any doubts, it’s always best to air on the side of caution and treat a worker as an employee. If you should have any questions contact your attorney to help you determine what your legal obligations are as an employer, it can save you time, money, and stress.
To learn more about distinguishing between an employee and an independent contractor visit:
U.S. Internal Revenue Service, Understanding Employee vs. Contractor Designation
Ohio Administrative Code § 4141-3-05, Definition of Employment
