- with readers working within the Securities & Investment industries
Democratic members of the House Labor Caucus have asked the U.S. Department of Labor (DOL) to rescind its proposed independent contractor rule and return to the stronger 2024 standard established during the Biden administration. The DOL’s currently proposed rule would rescind the 2024 rule on employee classification and return to a standard similar to the one the DOL used in 2021.
According to the DOL, the proposed approach is consistent with federal court precedent and makes it easier to distinguish between employees and independent contractors under the Fair Labor Standards Act (FLSA). However, Democrats characterize the proposed rule as a weakening of the current standard, which increases the risk of employee misclassification and the accompanying loss of wages and benefits.
The Financial Services Institute (FSI) and other members of its coalition sued the DOL over the 2024 rule, which took effect in March 2024. In April 2025, a federal court granted a motion to temporarily suspend implementation of the 2024 rule to allow DOL time to review and reconsider it.
Democratic lawmakers emphasized the importance of the “totality of circumstances” analysis in properly identifying the employer-employee relationship. They claim that the proposed rule is overly rigid in relying primarily on certain enumerated “core” factors and disregards economic reality factors. In contrast, a multifactor approach would ensure that all employees get the FLSA protections to which they are entitled.
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