The Trump Administration Is Loosening Gig Worker Rules. What Does that Mean for HR?

Key Takeaways

• DOL proposes reverting to economic reality test.
• Two factors—control and profit—gain priority.
• Federal rule eases gig worker misclassification risk.
• State ABC tests may still override federal standards.
• HR teams must audit contracts for dual compliance.

Summary

The Department of Labor has announced a proposed rule that would rescind the Biden‑era “multifactor economic reality” test and return to a narrower test focused on control and profit opportunity. The change would give employers greater leeway to classify workers as independent contractors, reducing federal scrutiny of gig‑platform staffing models such as Uber and DoorDash. However, states like California, New Jersey and Massachusetts continue to enforce stricter ABC‑type tests, so the impact will vary by jurisdiction. HR leaders are advised to audit existing contractor agreements to ensure compliance with both the new federal standard and applicable state laws.

Pulse Analysis

The Department of Labor’s latest proposal marks a decisive shift back to the “economic reality” framework that the Trump administration favored in 2021. By discarding the Biden‑era multifactor test, the agency places primary emphasis on two criteria: the degree of employer control and the worker’s opportunity for profit or loss. This streamlined approach mirrors earlier guidance and signals a more employer‑friendly stance, potentially reshaping how companies evaluate gig engagements across the United States.

For gig‑platforms such as Uber, DoorDash, and other on‑demand services, the proposed rule promises reduced federal enforcement pressure. With the DOL likely to apply a lighter touch in investigations, firms can more readily classify drivers and couriers as independent contractors, preserving cost‑effective labor models. Nonetheless, the federal change does not nullify state statutes; California’s ABC test, along with similar standards in New Jersey and Massachusetts, will continue to impose stricter thresholds. Consequently, litigation may persist at the state level, and courts could still favor the more rigorous multifactor analysis when interpreting independent‑contractor disputes.

HR professionals must act proactively. A comprehensive audit of all contractor agreements is essential to verify alignment with both the forthcoming federal rule and the diverse state tests that govern their workforce. This includes scrutinizing the exclusivity of engagements, compensation structures, and the extent of control exercised over gig workers. Additionally, firms should assess third‑party staffing arrangements to mitigate indirect liability. By establishing a dual‑compliance framework now, organizations can reduce audit risk, safeguard against future enforcement actions, and maintain flexibility in leveraging gig talent amid an evolving regulatory environment.