Independent Contractor Classification

The Economic-Realities Test After the 2024 Independent-Contractor Rule

The DOL’s 2024 rule, codified at 29 C.F.R. Part 795, "eliminated the two ‘core factors’ set forth in the 2021 Rule in favor of an ‘economic reality test’ focusing on ‘whether the worker is either economically dependent on the potential employer for work or in business for themself,’" with six factors — profit-or-loss opportunity, investments, permanence, control, integral-ness, and skill — where "no one factor should receive any predetermined weight." The first direct challenge failed on threshold grounds: Colt & Joe Trucking LLC v. U.S. Department of Labor, No. 1:24-cv-00391 (D.N.M. Jan 9, 2025) held the trucking-company plaintiff lacked standing because "[m]erely alleging that a regulation creates a chilling effect is not sufficient," and — post-Loper Bright — that arbitrary-and-capricious review remains deferential: the decision "did not overturn the APA’s ‘mandate that judicial review of agency policymaking and factfinding be deferential.’"

On the merits, the Fourth Circuit’s nurse-staffing decision is the fullest recent treatment. Lori Chavez-DeRemer v. Medical Staffing of America, LLC, 147 F.4th 371 (4th Cir. 2025) affirmed that over 1,100 registry nurses were employees under the six-factor Silk framework, where "[t]he focal point is whether the worker is economically dependent on the business to which he renders service or is, as a matter of economic reality, in business for himself." Setting pay unilaterally counted heavily — "setting a worker’s wages, without affording those workers an opportunity to negotiate, is evidence that an employer exercises ‘significant control’" — and owning a stethoscope did not cut the other way, because "the fact that a worker supplies his or her own tools or equipment does not preclude a finding of employee status" absent "large capital expenditures, such as risk capital and capital investments." The court also rejected a good-faith defense built on a thin lawyer consultation: "a brief or incomplete consultation with a lawyer regarding FLSA conformity does not satisfy the standards of the good faith defense."

For platform-style and service businesses, Lori Chavez-DeRemer v. NAB, LLC, No. 2:21-cv-00984 (D. Nev. Jan 14, 2025) shows the test’s reach: nail and eyelash technicians labeled contractors were employees because "[e]conomic realities, not contractual labels, determine employment status for the remedial purposes of the FLSA. So an employer’s labeling of its workers as independent contractors carries no weight." The court counted required on-premises waiting as compensable — "hours in which NAB’s employees were required to be on site, even if they weren’t actively serving customers, are considered working hours" — and treated coerced contractor agreements as retaliation, since "requiring employees to sign agreements and obtain licenses that reflect a significant change in the terms of their employment, or else face termination, is equivalent to constructive discharge."

Three throughlines for classification counseling. The regulatory test and the circuit tests now run on the same chassis — economic dependence, assessed through six non-exhaustive factors with no predetermined weights — so a classification that fails one will usually fail the other. Contractual labels, signed acknowledgments, and business-license requirements carry no evidentiary weight and can affirmatively hurt if imposed under threat. And challenges to the 2024 rule itself have so far stumbled on standing and deference, which means the rule’s framework is the operative baseline for gig-economy classification disputes unless and until an appellate court says otherwise.