Labor Department Finalizes Changes to Independent Contractor Test

Labor
Published

The U.S. Department of Labor (DOL) on Wednesday published a final rule changing its policy for determining independent contractor status under the Fair Labor Standard Act. Importantly, this test will not impact tests by the IRS or other federal agencies.

Unlike the current policy, which was issued under the previous administration and focuses on two of the five factors used to determine worker status, this final rule restores a “totality-of-the-circumstances” analysis, setting forth six non-weighted factors to consider when determining whether a worker is an employee or an independent contractor.

The test’s ultimate inquiry is whether, as a matter of economic reality, the worker is economically dependent on the employer (and thus an employee) or in business for themselves (and thus an independent contractor).

The six factors to consider under the test:

  1. Is the work performed an integral part of the employer’s business?
  2. Does the worker’s managerial skill affect the worker’s opportunity for profit or less?
  3. Is the relationship between the worker and employer permanent or indefinite?
  4. What is the nature and degree of the employer’s control?
  5. Does the worker use specialized skills to perform the work, and do those skills contribute to business-like initiative?
  6. Are investments by a worker capital or entrepreneurial in nature?

According to the rule, DOL will also consider additional factors that “may be relevant in determining whether the worker is an employee or independent contractor” to be considered in the question of worker status, but DOL did not provide examples of what those factors could be.

The changes in this final rule will go into effect on March 11, 2024.

NAHB filed comments when these changes were first proposed in 2022, noting that the new policy threatens to impact many industries that rely on the subcontractor business model, including residential construction. NAHB will continue to provide updates on forthcoming actions with the rulemaking.

Subscribe to NAHBNow

Log in or create account to subscribe to notifications of new posts.

Log in to subscribe

Latest from NAHBNow

IBS

Sep 02, 2025

NAHB International Builders’ Show Registration Opens for Final Time in Orlando

The National Association of Home Builders (NAHB) officially opened online registration and housing today for the 2026 NAHB International Builders’ Show@reg; (IBS), the largest annual light construction trade show in the world.

Economics

Sep 02, 2025

Single-Family Construction Down in Large Metros, Up in Rural Areas

In a sign of a soft housing market, single-family construction posted declines in nearly every geographic region in the second quarter of 2025, with the largest percentage drop of 3.8% occurring in large metro, suburban counties where most permit activity occurs. And while multifamily output also fell in large metro core counties, most other markets posted multifamily growth in the second quarter, according to the latest NAHB Home Building Geography Index (HGBI) for the second quarter of 2025 released today.

View all

Latest Economic News

Economics

Aug 29, 2025

Multifamily Absorption Rises in the Second Quarter

The percentage of new apartment units that were absorbed within three months after completion rose in the second quarter, according to the Census Bureau’s latest release of the Survey of Market Absorption of New Multifamily Units (SOMA).

Economics

Aug 28, 2025

Mortgage Rates Move Lower, Hitting 10-Month Low

Average mortgage rates in August continued their steady decline and are now at their lowest rate since last November.

Economics

Aug 27, 2025

Wood-Framed Home Share Increased in 2024

Wood framing continues to dominate the U.S. single-family home construction market, according to NAHB analysis of 2024 Census Bureau data.