SHRM Backs DOL Contractor Rule, Urges Key Clarifications

SHRM is broadly supportive of the U.S. Department of Labor’s (DOL) proposal to revise how organizations determine whether a worker is an employee or an independent contractor under the Fair Labor Standards Act (FLSA). But in its comment submitted during the rule’s public comment period, SHRM also urged the agency to make several targeted changes to ensure the final regulation is practical for organizations to apply.

According to the public comment, SHRM “strongly supports the proposed rule and urges the Division to finalize it with the clarifications and refinements identified [within our regulatory comment].” 

The proposed rule would rescind the DOL’s 2024 independent contractor regulation, moving from a totality-of-the-circumstances approach back to a Core Factors test, with economic dependence as the central inquiry. Under the proposed rule, two primary factors that carry the most weight in the classification analysis: nature and degree of control over the work and the individual’s opportunity for profit or loss. 

The proposed rule also identifies secondary or guidepost factors, which provide additional context but are less determinative. These factors include skill required to perform the work, permanence of the work relationship, and the extent in which work is integrated into the employer’s production processes. 

Sample Checklist: FLSA Compliance Audit Checklist

Support for Repealing the 2024 Rule

SHRM endorsed the DOL’s decision to roll back the 2024 rule, arguing it undermined its own goals of clarity and accuracy.

According to SHRM, the 2024 regulation’s seven-factor “totality-of-circumstances” test created unnecessary uncertainty by failing to provide a clear, workable framework for determining worker status at the time classification decisions are made. The 2024 rule left businesses and HR professionals to balance multiple factors without clear practical guidance. This legal and operational ambiguity made some organizations hesitant to invest in training and other workforce opportunities for independent workers, as supported by SHRM research.

SHRM argued this ambiguity was even more difficult for small and midsize organizations without dedicated legal teams.

SHRM supports returning to the 2021 rule’s core-factor framework, which places greater emphasis on control and profit-or-loss opportunity. This structure is both more consistent with court precedent and more useful for HR professionals making real-world classification decisions, according to SHRM.

SHRM’s own research supports that view. In a 2025 survey, 81% of HR professionals said “nature and degree of control” was a moderately or very useful factor in determining worker classification, and 43% said it was the factor their organizations relied on most.

Clarifying “Actual Practice” and Economic Dependence

SHRM also endorsed the proposal’s emphasis on examining the parties’ actual conduct rather than relying solely on contract language.

Reserved contractual rights should remain relevant, SHRM said in its statement, but should carry less weight than what actually happens in practice. A written agreement “is a valid and relevant artifact of the parties’ negotiated relationship,” even if it is not conclusive.

SHRM further supports the proposed definition of economic dependence, which distinguishes dependence on one business for work from a worker’s overall income level. The distinction, SHRM said, helps avoid the mistaken assumption that lower earnings necessarily indicate employee status.

Return to the Rutherford Standard

Another major area of support is the DOL’s decision to return to the Supreme Court’s “integrated unit of production” standard from Rutherford Food Corp. v. McComb.

The 2024 rule instead asked whether the work was “critical, necessary, or central” to the business — a formulation SHRM argued was so broad that it could sweep nearly all contractor relationships into employee status.

“As SHRM and the proposed rule correctly recognize, the 2024 formulation risked sweeping nearly all independent contractor relationships into employee status by creating a circular and overly expansive standard,” according to the comment.

SHRM further noted that organizations use independent contractors for a wide range of functions, including project work, specialized expertise, and seasonal needs, many of which are unquestionably important to business operations but do not necessarily render workers employees. The fact that the work of person may be important to the organization does not alone mean that it is integrated into the workflow, as contemplated by Supreme Court precedent. Proper classification depends on the economic realities of the relationship.

Toolkit: Employing Independent Contractors and Other Gig Workers

Concern Over an Alternative “Control-First” Test

Despite its overall support, SHRM objected to one alternative the DOL raised for consideration: a “control-first” approach that would end the analysis if the control factor alone pointed toward employee status.

SHRM claimed this approach would be inconsistent with Supreme Court precedent and would undermine the multi-factor economic realities test.

“A control-first rule would collapse the economic reality test into the common law test,” the comment said, “eliminating the multi-factor balancing that has distinguished FLSA analysis since 1947.”

SHRM urged the DOL to retain the two-core-factor, with the other factors as guideposts, analysis rather than allowing one factor to dictate the outcome.

Sample Checklist: Utilizing Independent Contractors

Recommendations for Additional Refinements

SHRM also asked the DOL to explicitly include that certain employer actions should not be treated as evidence of employee-like control.

These include providing safety training, anti-harassment training, compliance-related instruction, personal protective equipment, and access to AI tools. SHRM argued that organizations may otherwise avoid offering these resources for fear of increasing misclassification risk. Indeed, survey data shows that 36% of employers do not provide contractor training to avoid creating the appearance of an employment relationship.

SHRM also called for:

• Illustrative examples in the final rule.
• Plain-language guidance tailored to HR professionals.
• Webinars, FAQs, and other implementation resources.
• Coordination with SHRM to help disseminate guidance to employers nationwide.

A Push for Clarity and Flexibility

Throughout its comments, SHRM emphasized that neither employee nor independent contractor status is inherently superior.

“It is SHRM’s ardent belief, backed by research, that neither employee nor independent contractor status is inherently ‘better,’” the comment read. Therefore, SHRM does not believe that the law should seek to tip the scales towards one designation over another. 

Workplace demographics are evolving, technology is expanding flexible work opportunities, and more individuals are choosing how work fits into their lives. Public policy should recognize diverse work arrangements that help organizations attract talent while allowing workers access to benefits that align with their work structure and financial goals.