Are you sure your contractors are actually contractors?

If you’re using freelancers or independent contractors, this is worth paying attention to right now.

The Department of Labor has been going back and forth on how it determines whether someone is really a contractor or an employee under the Fair Labor Standards Act.

Rules have changed between administrations and a new proposed rule is in the works.

But the underlying question hasn’t changed: if someone works for you like an employee, they’re probably an employee in the eyes of the law.

What the DOL looks at

It’s called the “economic reality” test. It considers how much control you have over the work, whether the worker can profit or lose money based on their own decisions, how permanent the relationship is and whether the work is a core part of your business.

If you’re setting someone’s schedule, providing their tools and they only work for you, that’s going to look like employment no matter what your contract says.

Why it matters even if enforcement has eased

Federal enforcement may be lighter right now, but workers can still file private lawsuits. Many states apply stricter tests.

And if someone is found to be misclassified, you could owe back wages, overtime and payroll taxes going back years.

Some industries genuinely operate in grey areas here. That’s a reason to document your reasoning carefully, not a reason to ignore the issue.

If you’d like help with reviewing your contractor arrangements, get in touch. It’s a lot cheaper to sort this out now than after someone files a claim.

EEOC rollback on harassment guidance creates uncertainty for employers

The Equal Employment Opportunity Commission has rescinded its 2024 workplace harassment guidance, creating confusion around how existing federal anti-discrimination laws should be applied in practice.

The underlying law hasn’t changed. But the removal of detailed guidance means that employers have less clarity on expectations, particularly around sensitive areas like gender identity and workplace conduct.

For small businesses, this increases reliance on internal judgment. Clear policies, consistent handling of complaints and documented decision-making matter more than ever.

DEI programs face increased federal scrutiny

Federal enforcement priorities are shifting, with the Equal Employment Opportunity Commission signaling closer scrutiny of diversity, equity and inclusion initiatives.

Employers could face legal risk if programs are perceived to favor or disadvantage specific groups under existing anti-discrimination laws.

For small businesses, the takeaway is to make sure that initiatives are clearly structured around equal opportunity, not preferential treatment, and can be justified if challenged.

AI in hiring now firmly treated as an employment law issue

AI tools used in hiring and HR decisions are increasingly being treated as part of the employment decision itself.

That means federal anti-discrimination rules still apply, even if decisions are made or influenced by third-party software. Regulators are focusing on fairness, transparency and employer accountability.

For small businesses, this shifts the risk: using AI can increase it if you don’t understand how decisions are being made. Human oversight is becoming essential.

The overtime threshold is stuck at $35,568. Should you plan for it to change?

The federal salary threshold for overtime exemption is currently $35,568 a year. If a salaried employee earns less than that, they’re entitled to overtime for anything over 40 hours a week, regardless of their job title.

The Biden administration tried to raise that number significantly. A federal court struck down the entire rule in late 2024 and the threshold reverted. The DOL has signaled that overtime rulemaking is on its long-term agenda but there’s no new proposed threshold yet.

What this means for you

Some states already have higher thresholds. California, New York, Colorado and Washington all require higher minimum salaries for exemption than the federal level. If you have employees in those states, you need to follow the state rules regardless.

And, remember, salary alone doesn’t make someone exempt. They also need to meet the duties test, meaning their actual work needs to involve executive, administrative or professional responsibilities. A job title doesn’t determine this.

What I’d suggest

Don’t rush to change salaries based on a rule that doesn’t exist yet.

But review which employees you’ve classified as exempt and make sure that they pass both the salary test and the duties test at the current threshold.

If someone is earning right around $35,568 and doing mostly non-exempt work, that’s a problem you already have today.

If you want help with auditing your classifications, reach out. This is much easier to get ahead of than clean up after.

Q&A

Can I withdraw a job offer after I’ve made it?

Yes, but it carries risk. In most cases you can withdraw an offer if employment hasn’t started, but problems arise if the candidate has already relied on it, like resigning from another job. Discrimination laws also apply at this stage. If you need to withdraw an offer, act quickly, keep your reasoning clear and document everything.

Do I have to pay employees for time spent checking emails or messages after hours?

Potentially, yes. If non-exempt employees are doing work outside their normal hours, even something small like responding to messages, that time can count as compensable working time. This can add up quickly and create wage and hour issues. A clear policy on after-hours communication can help to reduce the risk.

Can I refuse a request for remote or hybrid work?

Yes, but how you handle it matters. There’s no general federal right to remote work, but requests can sometimes connect to other legal obligations, like a reasonable accommodation under the ADA or caregiving responsibilities. You can refuse for legitimate business reasons, but you should consider it properly, apply decisions consistently and document your rationale.

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