Another president, another standard

In February, the Department of Labor’s Wage and Hour Division published a proposed rulemaking intended to modify the standard for determining independent contractor status under the Fair Labor Standards Act. NRCA members who interact with independent contractors or those who may be interested in doing so should carefully review this proposal to understand how independent contractor status will be determined in the future.

Background

It is clear the independent contractor or subcontractor framework has become more common within the roofing industry in recent years. Independent contractors serve a critical function in roofing and the broader construction industry by providing specialized skills with greater flexibility compared with the traditional employer-employee relationship.

Employers that work with independent contractors say they provide high-quality products and services to consumers in an efficient manner at competitive prices in response to constantly changing market conditions. Furthermore, the independent contractor model provides certain advantages to entrepreneurial workers, such as greater autonomy and more opportunity to maximize earnings for the work performed.

Under the FLSA, originally enacted by Congress in 1938, employers are required to provide certain benefits, including wages and overtime compensation to employees, but such requirements are not applicable to those with whom they contract for services as independent contractors. To determine whether an individual is an employee or independent contractor, the employer must analyze the relationship based on DOL regulations and any state laws that may apply. It is worth noting federal rules have changed several times based on presidential administrations.

The 2024 rule

DOL’s new proposed rule modifies the criteria governing how to determine independent contractor status under FLSA. Once finalized, it will rescind the standard that became effective in early 2024 under the Biden administration, which consisted of seven factors for consideration, all of which were to be given equal weight in the analysis. Specifically, the “totality of circumstances” framework under the Biden rule required equal consideration of the following:

• Opportunity for profit or loss depending on managerial skill
• Investments by the worker and employer
• Degree of permanence of the work relationship
• Nature and degree of employer control
• Extent to which the work performed is an integral part of the employer’s business
• Worker’s use of skill and initiative

In addition, the 2024 rule requires “other factors” unique to a given situation may be considered on a case-by-case basis.

When issuing its rule in 2024, DOL officials stated the agency was making the modifications so the standard was more consistent with the law as interpreted by the courts since the inception of the FLSA. They also indicated the new rule was designed to combat the deliberate misclassification of employees as independent contractors and it would not result in widespread reclassification of workers who were properly classified.

NRCA advises companies to consult legal counsel to ensure all operations comply with applicable legal standards

In May 2025, the incoming Trump administration announced it would pull back on enforcement of the 2024 final rule while it re-examined the issue for potential modification. Despite this shift in emphasis on enforcement within the agency, the 2024 rule remains in effect for purposes of private litigation regarding the status of independent contractors.

The 2026 rule

The new proposed rule discards the criteria of the 2024 rule and replaces it with what is often referred to as an “economic realities” test that places the greatest emphasis for determining independent contractor status on two primary factors: employers’ level of control of the work being performed and the opportunity for independent contractors’ profit or loss in a given arrangement.

In addition, the 2026 regulation would allow for three secondary factors to be considered but in a manner that carries less weight within the analysis when compared with the primary factors, which are the amount of specialized skill required to complete the work, the degree of permanence in the relationship between the employer and worker, and whether the work being performed involves an integrated unit of production.

Trump administration officials and private-sector proponents of this version of the standard argue the two primary factors in the economic realities test have been the dominant factors used by the courts in litigation regarding independent contractors in recent years and, therefore, gives employers and workers greater certainty and more consistent determinations.

NRCA members have stressed the need to maintain clarity and consistency in the rules to preserve the independent contractor model as an option. NRCA members also recognize the need for strong safeguards to prevent unintended or deliberate misclassification of workers who otherwise should be classified as employees.

Be mindful

Roofing contractors should be aware the 2024 standard remains on the books until the 2026 proposed rule is finalized with publication in the Federal Register, which is likely later this year or early 2027. But given it is virtually certain the proposed rule will eventually be adopted largely in its current form, employers should anticipate the new standard and what that means for their businesses going forward.

Given the complex analysis of factors that determine independent contractor status and constant shifting of the criteria under successive presidential administrations, NRCA advises companies to consult legal counsel to ensure all operations comply with applicable legal standards. Additionally, some states have their own rules that apply to various types of employment arrangements and must be considered in conjunction with the federal standard.

NRCA will continue working in support of a fair, consistent independent contractor standard and will keep members informed of relevant developments.

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