Department of Labor Proposes New Independent Contractor Rule
The U.S. Department of Labor (DOL) has announced a proposed rule clarifying the definition of employee under the Fair Labor Standards Act (FLSA) as it relates to independent contractors.
In a press release, the DOL said its proposed rule:
- Adopts an “economic reality” test to determine a worker’s status as an FLSA employee or an independent contractor. The test considers whether a worker is in business for himself or herself (independent contractor) or is economically dependent on a putative employer for work (employee);
- Identifies and explains two “core factors,” specifically the nature and degree of the worker’s control over the work, and the worker’s opportunity for profit or loss based on initiative and/or investment. These factors help determine if a worker is economically dependent on someone else’s business or is in business for himself or herself;
- Identifies three other factors that may serve as additional guideposts in the analysis: the amount of skill required for the work; the degree of permanence of the working relationship between the worker and the potential employer; and whether the work is part of an integrated unit of production; and
- Advises that the actual practice is more relevant than what may be contractually or theoretically possible in determining whether a worker is an employee or an independent contractor.
NAHB has called on DOL to take steps to provide greater clarity to employers and workers in light of the often conflicting federal tests that exist to determine who is an employee and who is an independent contractor.
The proposed rule would also provide more clarity to shield more employers from misclassification claims, which occur when an employer incorrectly defines a worker as an independent contractor rather than an employee.
NAHB will review the rule in more detail once it is published in the Federal Register, and interested parties will have 30 days to submit comments.
For more information, contact David Jaffe.
Latest from NAHBNow
Aug 01, 2025
Meet at Home with Your Members of CongressNAHB members across the nation can build on the success of the June Legislative Conference by meeting with their lawmakers in their home districts in August to discuss key issues that affect the home building industry.
Jul 31, 2025
How Home Builders Beat the Labor Crunch with This Fast Financing PlanStruggling to secure labor can force builders to make tough decisions: Do you delay a project? Sacrifice profits? Or turn down new opportunities? But smart builders don’t just react — they adapt their financing strategy to meet labor challenges head-on.
Latest Economic News
Jul 31, 2025
Personal Income Rises 0.3% in JunePersonal income increased by 0.3% in June, following a 0.4% dip in May, according to the latest data from the Bureau of Economic Analysis. The gains in personal income were largely driven by higher wages and social benefits.
Jul 31, 2025
Housing Share of GDP: Second Quarter 2025Housing’s share of the economy registered 16.3% in the second quarter of 2025, according to the advance estimate of GDP produced by the Bureau of Economic Analysis. This reading is unchanged from a revised level of 16.3% in the first quarter and is the same as the share one year ago.
Jul 30, 2025
Fed Remains on Pause AgainAt the conclusion of its July meeting, the Federal Reserve’s monetary policy committee once again held the federal funds rate constant at a top rate of 4.5%. However, two members of the committee dissented from the decision (Fed Board Governors Waller and Bowman), the largest number of dissenting votes since 1993.