On May 1, 2025, the Department of Labor’s (DOL) Wage and Hour Division announced that it will no longer enforce a Biden-era labor rule that aimed to reclassify gig workers as employees rather than independent contractors. This decision marked the culmination of ongoing efforts by business groups and the Trump Administration to undo regulations viewed as too restrictive for businesses, particularly in the rapidly growing gig economy. Gig workers are primarily found in sectors like ridesharing, food delivery, and other freelance or temporary work arrangements.

In 2024, the Biden Administration’s DOL introduced a new rule that laid out a comprehensive, six-prong economic realities test to determine whether workers are independent contractors (the “Biden Rule”). The Biden Rule was designed to address what the Biden Administration saw as growing worker exploitation, particularly in gig economy jobs, offering gig workers protections such as minimum wage and overtime pay. The Biden Rule focused on factors like the level of control a company has over the worker’s activities, whether the work is integral to the business, and the worker’s economic dependence on the company. This shift was part of a broader push to ensure gig workers were afforded the same rights and protections as traditional employees.

The Biden Rule faced immediate legal challenges because it changed how the DOL determines whether a worker is an employee or independent contractor for purposes of the federal minimum wage and overtime law. Business groups believed the Biden Rule unnecessarily increased costs, reduced flexibility, and created legal uncertainty. In light of the DOL’s May 1, 2025 announcement that it will no longer enforce the Biden Rule, these pending lawsuits may be dismissed. 

In addition to announcing that it would no longer enforce the Biden Rule, the Trump DOL instructed businesses to utilize “longstanding principles” outlined in older agency guidance documents when determining whether a worker should be classified as an employee or independent contractor, specifically a July 2008 fact sheet and 2019 Opinion Letter.

The 2008 standard mulls seven prongs: whether the work provided is integral to a company’s business; the duration of the working relationship; the worker’s investment in facilities and equipment; the level of control of a company; the worker’s ability for profit and loss; how much judgment and initiation a worker had, and the level of independent organization and operation.

The 2019 Opinion Letter applied the 2008 standard’s seven prongs to the gig economy and concluded typical gig economy workers are independent contractors.  Accordingly, the Trump DOL’s decision to reinvigorate the 2019 Opinion Letter appears to signal a shift towards viewing gig economy relationships as distinct from traditional employment. 

The May 1, 2025 announcement represents a shift in labor policy with significant implications for gig economy businesses and workers. While businesses celebrate the return to a more flexible labor market, and labor advocates warn that this change will leave many gig workers without crucial protections, both positions may be somewhat premature—the May 1, 2025 announcement makes clear that, until DOL takes further action, the Biden Rule remains in effect for purposes of private litigation.  The issue of worker classification in the gig economy remains a contentious and evolving debate.

For more information, please contact Mike Rahmn, Matthew Iverson, or your Nelson Mullins point of contact.