The Congressional Research Service recently issued an update to the U.S. Department of Labor's 2024 Independent Contractor Rule. In January, the department identified criteria for how it classifies whether a worker is an employee or independent contractor for purposes of the Fair Labor Standards Act.

"Accurate employee classification is important, because the rights and protections afforded by the FLSA are available only to employees and not to independent contractors," the update said. "Misclassifying an individual as an independent contractor may result in not only financial loss for the individual but potential loss in tax revenues for federal and state governments."

The Labor Department contends that the new rule will provide uniform guidance to employers and is better aligned with judicial precedent that has interpreted the FLSA. Critics counter that the new rule may discourage the use of contract workers and will force companies to review their current contractor relationships to ensure they have properly classified their workers to avoid possible noncompliance.