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November 11, 2025
Congress is proposing changes to the definitions of “employee” and “independent contractor” currently provided in the Fair Labor Standards Act of 1938 (“FLSA”) and the National Labor Relations Act (“NLRA”). On February 13, 2025, the House of Representatives introduced bill H.R. 1319 (the “House Bill”), which seeks to amend the legal standard for determining whether an individual is considered an independent contractor rather than an employee for the purposes of federal labor laws. On July 9, 2025, the Senate introduced a companion bill, S.2228, which proposes to “harmonize the FLSA’s definition of employee with the common law” (the “Senate Bill”) (together with the House Bill, the “Bills”). The Bills, which are still in committee in the respective chambers of Congress, aim to update federal labor law definitions to allow more work relationships to be classified as independent contractors—emphasizing control and entrepreneurial risk over employer-dictated terms—effectively changing how federal law determines employment status.
Potential Impact on Employees
The Positives: The Bills’ revised definitions can provide clarity for some business relationships, which may reduce the misclassification of a worker who is clearly an employee. A clearer statutory test for determining employment status may help in reducing ambiguity for certain arrangements and make it easier for employers to comply with the law where there may have been legal gray areas. The revisions may also help reduce litigation over borderline issues regarding employment status.
The Negatives: If the Bills are enacted, fewer workers will be classified as employees under federal law. The Bills markedly shift the standard for employment status toward more of a common-law independent-contractor focus, which tends to increase the number of workers that meet the independent contractor definition in practice because many modern work relationships are increasingly emphasizing flexibility and project-based work arrangements (i.e., gig workers) over more traditional, long-term employment arrangements.
As a result, the workers who are reclassified from an employee to an independent contract would lose both FLSA protections (overtime, minimum wage, hours) and NLRA protections (collective bargaining rights). The loss of wage and hour protections could have a direct impact on earnings for individuals who are low paid or work long hours, while the loss of collective bargaining rights could reduce workers’ ability to unionize. The revised definitions could also result in less access to employer-provided benefits, such as employer-sponsored health plans, eligibility for unemployment insurance, and employer retirement contributions, shifting the responsibility (and added cost) to the worker.
Potential Impact on Independent Contractors/Gig Workers
The Positives: Companies and workers who prefer independent contractor arrangements could benefit from clearer rules that protect flexible business models from being re-characterized as employment models. This would most likely benefit those involved in short-term, project-based work. The enactment of the Bills could result in more roles being legally classified as independent contractor roles, allowing companies to offer more opportunities for gig work/contract roles because of the lower overhead costs associated with those roles.
The Negatives: As stated above, as more workers are legally classified as independent contractors because of the Bills, more workers will lose the federal protections provided by the FSLA and NLRA, along with employer-paid benefits and other workplace protections. Further, independent contractors are responsible for paying self-employment taxes, paying for health insurance, and saving for their retirement, which could significantly impact the financial security of these workers.
Potential Impact on Employers & the Labor Market
The Positives: With more workers classified as independent contractors, employers’ overhead costs may decrease, potentially resulting in lower prices for consumers or high profit margins for employers.
The Negatives: Employers will have to deal with a potential increase in litigation at the state level, as jurisdictions that have more protective standards for workers may continue to utilize their own tests. Thus, employers that operate in multiple states may have to deal with varying court ruling depending on jurisdiction.
The Takeaway
As the Bills are still working their way through the House and the Senate, it has yet to be determined what their actual impact will be if enacted and how courts will ultimately interpret the amended language. Nevertheless, whether you’re an employer, an employee, an independent contractor, or somewhere in between, you need to keep your eyes on the status of the Bills and seriously consider the potential impacts they may have on you if enacted. While the gig economy has experienced rapid growth in recent years, the erosion of the safety-net protections that traditional employees have relied upon for nearly a century could cause several aspects of the U.S. economy to suffer.
This article is designed to provide one perspective regarding recent legal developments, and is not intended to serve as legal advice. Always consult an attorney with specific legal issues.
