Legislative lowdown: Trump agencies return to business-friendly standards for gig worker, joint-employer status

Federal labor agencies recently overturned two Biden-era policies concerning gig worker and joint employer status.

The decisions could have implications for HR teams at organizations that employ large shares of independent contractors, or those that work for franchisors or staffing firms.

DOL moves to rescind 2024 independent contractor rule. On Feb. 26, the Department of Labor announced a proposed rule for determining whether an employee is an independent contractor under the Fair Labor Standards Act (FLSA).

The rule would rescind a 2024 regulation issued by President Joe Biden’s administration that directed businesses to take into account a number of factors when determining independent contractor status, including the degree and permanence of the work relationship, and investments by the worker and employer. Under this “multifactor economic reality” model, no one consideration should take precedence over another. Federal courts have long deferred to this model when hearing cases regarding FLSA classification.

President Donald Trump’s second administration is seeking to rescind this rule and replace it with a regulation similar to one issued in 2021, during his first term, but never took effect. The proposed rule would retain the “economic reality” test, but direct employers to consider two “core factors” when determining if an employee is an independent contractor: “The nature and degree of control over the work,” and “The worker’s opportunity for profit or loss based on initiative and/or investment.” Under this model, employers could take other factors into account, but they would be given less weight than the two main considerations.

The Trump administration’s proposed model is considered more business-friendly, as it’s expected to make it easier for employers to classify workers as independent contractors. These workers typically lack benefits extended to their full-time counterparts, such as a full minimum wage, overtime pay, and workers’ compensation, among others.

Labor Secretary Lori Chavez DeRemer said the policy was intended to “protect workers’ entrepreneurial spirit and simplify compliance for American job creators navigating a modern workplace.”

NLRB withdraws Biden-era joint-employer rule. Also on Feb. 26, the National Labor Relations Board said it’s withdrawing a rule for determining joint-employer status that was adopted by the Biden administration in November 2023.

The Biden-era rule, which was blocked by a Texas court the following spring, would have made it easier for two businesses to qualify as a joint-employer of a group of employees. It was expected to have an impact on franchisors or businesses that hire workers through staffing firms, potentially putting large firms on the hook for unfair labor practices that occur at the workplaces in their purview, for example.

The final rule issued by the Trump administration officially reinstates a 2020 rule for determining joint-employer status that has been in effect since the Biden policy was blocked.

Under the rule that the NLRB reinstated, joint employer status depends on whether a business exercises “substantial direct and immediate control” over at least one essential term and condition of another company’s employees.