Ted Hollis Authors Allwork.Space Article on DOL’s Proposed Changes to Contractor Rule
Ted Hollis, an Indianapolis partner in Quarles & Brady’s Labor & Employment Practice Group, wrote an article for Allwork.Space on the Department of Labor’s (DOL) Wage and Hour Division proposed change to a contractor rule that could affect how millions of freelancers, gig workers and contract professionals are classified under federal law.
Hollis wrote that that under the proposed rule, two factors — control and opportunity for profit or loss — would carry the most weight in determining whether someone is an employee or an independent contractor. He also explained why the DOL says the previous 2024 rule was not working, how this can be a win for companies who are worried about safety and compliance, and what this means for the future of work.
An excerpt:
Under the proposed rule, two “core factors” would carry the most weight in determining whether someone is an employee or an independent contractor, according to the DOL’s NPRM.
The first is control. If a worker sets their own schedule, chooses which projects to take on and is free to work for competitors, that points toward independent contractor status. If the company dictates those terms, the relationship looks more like employment.
The second is opportunity for profit or loss. A worker who can earn more (or lose money) based on their own business decisions, investments or hustle is more likely an independent contractor under this framework. Someone who can only earn more by putting in more hours? That looks like an employee.
When both of these factors point in the same direction, the DOL says there is a “substantial likelihood” the classification is correct. Three other factors, including the skill required, the permanence of the relationship and whether the work is part of the company’s integrated production process, remain in the analysis but are described as “less probative.”
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How the government classifies workers is one of the most consequential policy questions in labor and employment law. Reclassifying contractors as employees can trigger minimum wage and overtime obligations, benefits eligibility, tax withholding and exposure to wage-and-hour lawsuits.
For companies that have built their business models around contract talent, the proposed rule’s emphasis on control and profit-or-loss opportunity provides a clearer set of guideposts. For workers, the focus on actual practice over contract language signals the DOL intends to look past paperwork and examine whether a worker genuinely operates with the independence that contractor status implies.