Last week the U.S. Department of Labor (DOL) announced (5/1 Field Assistance Bulletin) it will stop enforcing its Biden-era regulations on determining what an independent contractor (IC) is and go back to a standard set in mid-2008. The Biden-era rule laid out six criteria to determine independent contractor status. This rule made it harder to classify a worker as an independent contractor.

The 2008 standard uses seven criteria. (DOL Fact Sheet #13)

These are:

• • Is the work provided integral to the company’s business?
  • What is the duration of the working relationship?
  • Does the worker have an investment in facilities and equipment?
  • What is the level of control of a company?          
  • Can the worker experience profit or loss from the work being performed?
  • How much judgement and initiation does a worker have over the work being performed?
  • What is the level of independent organization and operation that that independent contractor has?

With the DOL reconsidering its IC rule, lawsuits making their way through the Fifth Circuit, Eleventh Circuit, and a Texas district court were paused by those Courts.

In addition to the federal regulatory and judicial activity changing its rules around independent contractor status, some states are also taking up this issue. The highest profile state to address independent contractor status to date was California. Several years ago, they passed a particularly onerous state law that virtually eliminated independent contractor status in that state. The California law was called AB5 and impacted on so many jobs in unanticipated ways, the State had to backtrack and amend this law to exempt many of the jobs (over 100) that it had originally changed to employment status.

Now Michigan is considering a law similar to the disastrous California law. Two bills are in the Michigan Senate that adopt much of what the California AB5 bill did. Senate bills 6 and 7 implement the California-style “ABC test” that makes it extremely difficult to be an independent contractor and for businesses to hire people as contractors. If these bills become law, they would impact Michigan small businesses similar to what happened in California.

The bills also mandate public wage disclosure for all businesses and impose felony penalties for misclassification and other violations.

The Small Business Association of Michigan (SBAM) that opposes these bills reports that while Michigan has experienced a 33% growth of self-employment in the last 20 years, California saw a drop of 10.5% in self-employment since the passage of AB5 in 2019.

These two bills are currently in the Michigan Senate’s Labor Committee. Hopefully that is where they will stay. Fortunately, the Michigan House has a pro-business Republican majority that will not be open to passing such anti-small business laws.

What is being debated at both the national and state levels around independent contractors’ status is on one side, the Democrats and unions argue persons should not be allowed to work for themselves.

Most small businesses are individuals that put themselves out there to provide services to other businesses. Democrats argue business takes undue advantage of independent contractors and these contractors need the legal protections that come with being employed. Underlying this argument is the belief that independent contractors cannot be trusted to pay their fair share of taxes and it’s better to get established businesses to be responsible for collecting taxes from workers. Unions oppose independent contractor status because it’s much harder to organize and collect dues from independent contractors. Both parties seem to be disingenuous in their positions.

On the other hand, independent contractors argue they have chosen to work for themselves and do not want to be tied down to an employer with work schedules and working and with supervision and work rules. They want the opportunity to work as they choose. As for the businesses that engage ICs, larger businesses need the flexibility that allow for engaging workers when they need them and for what they need them to do and when that work is done the independent contractor can move on and the employer does not bear the burden of employment costs.

National job statistics report there are over 65 million people working for themselves in the U.S. The regulations and state laws trying to redefine what and how these people choose to work are really just an attempt to put more controls around work.

Sources: Law360 Employment Authority. DOL Halts Enforcement of Bidens’s Contractor Rule (5/2/2025); SBAM Newsletter. Tell Your State Senator to OPPOSE California-Style Contractor Restrictions.