The U.S. Department of Labor on Thursday unveiled a highly anticipated proposed rule to determine how employers should classify independent contractors.

The proposal would replace a Biden-era rule that made it more challenging for organizations to classify workers as contractors with one similar to what the Trump administration advanced during the president’s first term in office—largely considered a more business-friendly standard.

What is the proposed independent contractor rule?

According to the DOL, the rule would require organizations to apply an “economic reality” standard in determining whether a worker is an employee or independent contractor. To qualify as an employee who is “economically dependent” on the organization—or in business for themselves—the organization must demonstrate two “core factors”: how much control the person has over their work and their opportunity for profit or loss connected to their investment in the work.

Other factors that employers must consider include skill level, permanence of the position and “whether the work is part of an integrated unit of production.”

A DOL statement on the proposals says the “streamlined” approach would “make it easier to properly differentiate between employees with the protections under the Fair Labor Standards Act and those workers who work as independent contractors.” The measure also aims to extend this standard to employee and contractor classifications related to the Family and Medical Leave Act and...

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