The U.S. Department of Labor said it will not enforce Biden-era rules on how employers should classify workers as independent contractors (ICs) versus employees under the Fair Labor Standards Act (FLSA) – a change that carries significance for the promotional products industry, for which the Biden rules had prompted concerns of work and productivity loss.

“Agency investigators are directed not to apply the 2024 rule’s analysis in current enforcement matters,” the Labor Department said in a May 1 Field Assistance Bulletin (FAB).

The bulletin, which was issued by the department’s Wage and Hour Division, noted that federal labor officials are reviewing the 2024 rule and are considering rescinding it. The analysis currently underway includes an examination of what officials said might be an appropriate standard for determining who qualifies as an FLSA employee versus an IC.

Adopted by the Labor Department under President Joe Biden, the 2024 regulations, in effect, made it more difficult for an employer to designate a worker an IC as opposed to an employee.

As of now, the 2024 rule that came into play under Biden remains on the books, despite it not being enforced.

“This guidance does not change existing regulations but reflects how the department is allocating enforcement resources during the review of the 2024 rule,” the Labor Department said. “The department may still exercise enforcement authority in individual cases deemed appropriate by the Wage and Hour Administrator or a designee.”

The Labor Department’s Wage and Hour Division said it will “enforce FLSA in accordance with Fact Sheet #13 (July 2008), and as further informed by Opinion Letter FLSA2019-6 with respect to any matters for which no payment has been made, directly to individuals or to the DOL, for back wages and/ or civil money penalties as of May 1, 2025.”

The 2008 Fact Sheet outlines factors for determining IC status that are somewhat similar to the 2024 rule, saying a totality of circumstances must be taken into consideration to determine IC status. The 2019 Opinion Letter addresses the IC status of service providers in a virtual marketplace company.

Of note: Until the 2024 IC rule is changed or rescinded, employers that fail to classify workers in accordance with that Biden-era standard could still face lawsuits under that rule from workers who feel they were improperly classified as ICs. “Until further action is taken, the 2024 Rule remains in effect for purposes of private litigation and nothing in this FAB changes the rights of employees or responsibilities of employers under the FLSA,” the Labor Department said in its Field Assistance Bulletin.

Promo’s Concerns

There is reliance on ICs in the promo products market for everything from sales work to graphic design, and there was considerable concern that the Biden-era regulations would compel the reclassification of many ICs to employees.

Some feared there would be more bureaucracy, work losses for ICs and less production for businesses, as at least some companies decided to part ways with the contractors rather than shoulder the greater expense of taking them aboard as employees.

While the Biden-era Labor Department believed that its rule would “merely result in the independent contractor becoming an employee, insignificant consideration is given to the other alternative: Namely, that the employer could opt to end the position,” said attorney Chuck Machion, senior vice president and senior counsel at ASI, last year when the 2024 rule went into effect.

Some sales reps who’ve worked as ICs in promo favor the Biden-era rule, saying it helped protect them from being taking advantage of. “The rule from the government readjusts business practices that harmed the workforce,” a rep who wished to remain anonymous told ASI Media when Biden's administration moved to enact the rule.

The Biden rule has faced a number of lawsuits that threw its future into question. The current Labor Department’s position in those suits is that its “reviewing the rule,” including its consideration of rescinding it.

When President Donald Trump won re-election to the White House, it appeared the Biden administration’s regs’ days may be numbered. The Biden rule had replaced regulations Trump set in place during his first term. The Trump rules, business leaders in promo and other markets said, allowed for wider use of the IC designation.

Differences in the Rules

The Biden administration Labor Department said it implemented its IC status rule to help workers classified as ICs when they should be employees, which generally enjoy greater protections under the law.

Most broadly, the Biden rule says that a worker isn’t an IC if they’re economically dependent on an employer for work. From there, the rule establishes six nonexclusive factors that must be analyzed to determine if a worker is an employee or IC under FLSA.

The factors are the degree to which the worker has the opportunity for profit or loss depending on managerial skill, the financial stake and nature of any resources a worker has invested in the work, the degree of permanence in the work relationship, how much control the employer has over the work, the skill and initiative required of the worker and the extent to which work performed is an integral part of the employer’s business.

The Biden-term IC rule replaced a 2020 regulation set in place under Trump that established an “economic reality” test for evaluating worker-employer relationships, which rooted the IC determination in two core factors: the nature and degree of a worker’s control and profit-or-loss opportunity. There were also three “additional guideposts.”