The U.S. Department of Labor (“DOL”) is signaling a business-friendly shift that could significantly affect how employers structure their workforces and manage compliance risk. In a recent regulatory agenda framed as putting “American Workers, Businesses First,” the DOL indicated it will roll back several Biden-era rules that expanded employee coverage and liability. In particular, the agency plans to revisit the narrower test for independent contractor status, reassess the broadened scope of joint employer liability, and re-evaluate Fair Labor Standards Act (“FLSA”) exemptions for certain salaried and domestic service workers. For employers that rely on contractor models, franchise structures, staffing vendors, or live-in care arrangements, these changes present both opportunity and risk, and they call for careful, proactive planning rather than a wait-and-see approach. Below, our friends at the Hoyer Law Group, PLLC explain how the DOL’s new agenda reshapes employer compliance.
Independent Contractor (Mis)classification
One of the most closely watched developments involves independent contractor classification. The current agenda indicates that the DOL intends to discard the Biden-era independent contractor rule as a deregulatory action, without immediately replacing it with a new framework. That rule applied a six-factor “economic realities” test to determine whether a worker was economically dependent on a company and therefore an employee, or truly in business for themselves as an independent contractor. Since May 2025, the DOL has already stopped enforcing the Biden-era analysis and issued internal guidance instructing its field staff not to apply it in investigations. This marks a meaningful shift in day-to-day enforcement and suggests that employers could soon have more flexibility in how they engage certain workers, particularly for project-based, specialized, or geographically dispersed work.
However, this does not mean that misclassification concerns disappear. Courts continue to apply their own multi-factor standards during the transition, and other laws, including IRS rules, state statutes, and unemployment insurance regimes, use different tests that are often more restrictive. So, employers that overcorrect by aggressively expanding their use of 1099 models may still face private litigation. A better approach is to use this moment to strengthen contractor frameworks:
- Confirm that independent contractors truly operate as separate businesses, with their own tools, control over schedule and methods, and the opportunity for profit or loss;
- Revise agreements to emphasize deliverables and independence; and
- Train managers not to treat contractors as employees in practice.
Joint Employer Liability
The DOL’s agenda also points to a new rulemaking effort around joint employer liability under the FLSA. The Biden-era approach broadened potential exposure for organizations that indirectly influence another entity’s employees, including franchisors, parent or subsidiary companies, general contractors, and businesses that rely heavily on staffing agencies. The upcoming rule is framed as an effort to guide the Wage and Hour Division’s enforcement and promote greater uniformity among courts. Employers may see more predictable standards and potentially narrower pathways to joint employer findings, but the legal risk will not disappear. Day-to-day operations and contract language will still determine whether a company is treated as a joint employer in practice.
For businesses operating franchise systems, using large staffing vendors, or sharing workforces across affiliated entities, this is a crucial time to tighten governance. Employers should map their labor supply chains and identify all situations where workers from a vendor, franchisee, or affiliate perform services under their direction or on their premises. Contracts should clearly spell out which entity hires and fires, sets pay, schedules, and supervises the workers. Operationally, organizations that wish to avoid joint employer findings should resist the temptation to direct another company’s personnel decisions. Instead, they should anchor their expectations in performance standards, such as safety, quality, and timelines, while allowing vendors and franchisees to manage the details of hiring, discipline, and scheduling.
FLSA Exemptions
The DOL has also confirmed that it will revisit domestic service worker exemptions under the FLSA, focusing on an Obama-era change that expanded wage protections for live-in domestic service workers. This review has significant implications for employers in home-based care, household staffing, and live-in arrangements, including families and agencies that staff 24-hour or on-call roles such as nannies, caregivers, and house managers. The agency may recalibrate which domestic service positions qualify for exemption and under what conditions. It may also give renewed attention to issues such as sleep time, on-call time, and recordkeeping in live-in situations. Employers in these sectors should not rush to reclassify roles based on speculation. Still, they should take this opportunity to review schedules, classifications, and timekeeping practices, and ensure they accurately capture all compensable hours and properly document any room, board, or sleep-time arrangements.
Across all these areas, documentation and training remain the employer’s most vigorous defense. In independent contractor relationships, contemporaneous records of who controls what aspects of the work, how pay is set, and how the parties interact will matter as much as contract language. In joint-employer scenarios, clear agreements and consistent operational practices can demonstrate that vendors or franchisees, rather than the brand or client, exercise core employer functions. For domestic and live-in roles, accurate time records, well-drafted policies, and written acknowledgments of work and rest expectations can reduce disputes and provide a clearer foundation if the rules change.
Payroll and HR systems also need to keep pace with shifting rules. Employers should ensure their HR and payroll platforms can adapt quickly if the DOL narrows or broadens exemptions, updates guidance on live-in workers, or changes its expectations for recordkeeping. This may require separate earnings codes for particular types of hours, the ability to track on-call and sleep time distinctly, and reporting features that support audits and investigations. Coordinating legal, HR, and payroll teams now will make it easier to implement changes when final rules are issued.
Employers should also keep one eye on state and local developments. Even as federal rules provide more business-friendly protections, some states continue to apply strict “ABC” tests for independent contractors, wage-and-hour orders that restrict exemptions, and domestic worker bills of rights that expand protections. Multi-state employers must design their classification and wage-and-hour strategies with the highest risk jurisdictions in mind rather than relying solely on federal trends. A thoughtful, jurisdiction-specific approach can help minimize the risk that a federal relaxation leads to unexpected liability under state law.
Takeaways
The DOL’s current agenda offers employers an opening to reduce uncertainty, align their models more closely with operational realities, and restore some workforce flexibility. But the safest path forward is not to relax compliance efforts; it is to refine them. Employers that move early to audit roles, update contracts, train supervisors, and coordinate with payroll and HR systems will be better positioned to navigate whatever final rules emerge and to defend their practices if challenged. For more information, contact a federal employment lawyer today.