Are Independent Contractors Safe?

Minimum wage and overtime. These rights are afforded to every employee in the United States, but not to every worker.

Under the Fair Labor Standards Act (FLSA), whether a worker is classified as an employee or an independent contractor determines access to the statute’s core protections. The FLSA entitles employees to federal minimum wage and overtime pay, along with recordkeeping and anti-retaliation safeguards.

Independent contractors, by contrast, fall outside the FLSA’s coverage. As a result, the classification dictates whether a worker can bring a claim for unpaid minimum wage or overtime. The distinction also carries other consequences: Workers treated as contractors typically do not receive employer-provided benefits and are excluded from federal collective bargaining protections.

Given the importance of the classification, how does a worker know if they are an employee or an independent contractor? A 2024 rule by the Department of Labor (DOL) seeks to answer this question.

The rule—issued through the DOL’s Wage and Hour Division—replaced a 2021 rule with an approach that assesses the “economic reality” of the worker’s situation. The rule considers the totality of the circumstances, flagging six factors in particular.

These factors include: a worker’s opportunity for profit or loss; investment by the worker and employer; the work relationship’s degree of permanence; the extent of control the employer has over the person’s work; whether the work is integral to the employer’s business; and the extent to which the worker’s skill and initiative are required.

The DOL stated that it was returning to an “economic reality” framework to reflect the FLSA’s broad definition of employment and longstanding U.S. Supreme Court precedent emphasizing economic dependence.

The confusion does not end there, however. In May 2025, the Acting Administrator of the Wage and Hour Division, Donald M. Harrison, III, issued a field assistance bulletin instructing staff not to apply the 2024 rule when conducting agency investigations. Instead, investigators should rely on guidance from a 2008 Fact Sheet and a 2019 Opinion Letter.

The DOL acknowledged that the 2024 rule remains in effect even as the Department considers alternative standards. Although agency investigators will not conform to the 2024 rule’s standards in investigations, workers who believe they were wrongly labeled as independent contractors can still file private lawsuits and ask courts to apply the 2024 rule. But with differing standards potentially applied in different jurisdictions, uncertainty remains for employers and workers alike.

In this week’s Saturday Seminar, scholars discuss how to improve the position of diverse groups of workers.

• The binary classification of workers as independent contractors or employees is outdated for the modern gig economy, contends practitioner Mollie Harper in an article in Wake Forest Law Review. Harper proposes that Congress should pass legislation that creates a hybrid category of worker. Under Harper’s recommended approach, an independent worker would qualify for many of the benefits and protections that employees receive, including anti-retaliation protections, tax withholding, and the right to collectively bargain. Independent workers would likely not qualify for overtime or minimum wage because of the required tradeoff between benefits and the flexibility of gig employment, Harper acknowledges. Harper concludes that this hybrid approach is a sensible route that recognizes the complexities of modern working relationships in the “gig” economy.
• The tension between “gig” work and traditional employment is overstated, argues practitioner Sarah M. Levine in an article in the Yale Law Journal. Levine explains that companies employing independent contractors—such as Uber, Lyft, and Instacart—lobby for “third-category laws,” which frame flexible work arrangements as being incompatible with the benefits of traditional employment. Levine contends that there is a rich history of fully protected flexible work, pointing to union hiring halls and piece-rate pay arrangements as examples. Levine maintains that “third category laws,” which grant contractor-like status and limited protections, perpetuate existing labor market inequalities by transferring wealth from underprivileged workers to corporations. Levine advocates enhanced enforcement of existing labor laws and new legislation promoting flexibility for employees.
• Internships are often exempt from federal and state employment protections because legislators and judges struggle to define them, argues practitioner Seth Goldstein in a forthcoming article. Goldstein explains that a student is only entitled to protection under the FLSA if a court finds that the student economically benefits from the internship. This economic analysis fails to recognize that students may pursue unpaid internships because they are perceived as necessary to securing a full time job in the future, contends Maintaining the distinction between internships and employment promotes the proliferation of unpaid internships which favor the privileged, Goldstein emphasizes. Goldstein recommends that courts take a more holistic approach when evaluating whether a student intern is entitled to legal protection and benefits.
• In an article in the New York University Law Review, practitioner Peter Rawlings explains that the FLSA allows employees to bring a collective action on behalf of themselves and their coworkers when an employer violates minimum wage or overtime laws. As Rawlings recognizes, however, employers increasingly require workers to sign arbitration agreements, prohibiting workers from suing over wage violations and other workplace-related issues. Rawlings reveals that some courts do not notify arbitration-bound employees when their coworkers commence suits under the FLSA, despite courts being authorized to do so. Rawlings argues that this approach is contrary to the goals of the law because it impacts workers’ ability to alleviate harms. Courts would better achieve the goals of the law by ensuring notice to a wider pool of plaintiffs, Rawlings concludes.
• In an article in the Economic Policy Institute, Adewale A. Maye, Daniel Perez, and Margaret Poydock at the institution explain that independent contractor status strips workers of minimum wage and overtime protections under the FLSA, and collective bargaining rights under the National Labor Relations Act. Maye and several coauthors estimate that misclassified construction workers lose up to $19,526 annually, while truck drivers lose as much as $21,532 in wages and benefits. To curb these losses, the Maye team urges policymakers to adopt a strong, uniform legal test for employee status and to pass the Protecting the Right to Organize Act, which would make it harder for employers to misclassify workers to prevent unionization.
• In an article in Villanova Law Review, Arianne Renan Barzilay, of the University of Haifa Faculty of Law, examines how the FLSA fails millions of Americans who work multiple jobs simultaneously. Barzilay explains that the FLSA’s overtime provision aggregates hours only within a single employment relationship, leaving cumulative overtime uncompensated. Barzilay argues that this structure overrides overtime and creates a structural pay gap. To address this regulatory blind spot, Barzilay proposes requiring employers to count a worker’s total hours across jobs, share responsibility for overtime pay proportionally, and create portable benefit systems that travel with workers from job to job.