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Labor Bill Could Turn Many Insurance Producers Into Employees: NAIFA

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What You Need to Know

  • The House and Senate bills would help independent contractors unionize.
  • Some insurance agents have sued to become employees and access company benefits.
  • NAIFA says turning into an employee could affect a financial professional's tax status.

The National Association of Insurance and Financial Advisors is working to change a U.S. House bill that could classify many insurance agents, insurance brokers and financial advisors as employees, rather than as independent contractors.

The association is asking members to help it lobby to add an exemption for financial professionals to the “Protecting the Right to Organize Act” bill and a Senate PRO Act companion bill.

The Basics

Rep. Bobby Scott, D-Va., chairman of the House Education and Labor Committee, introduced the House version of the PRO Act bill, H.R. 842, together with House Speaker Nancy Pelosi; Rep. Frederica Wilson, D-Fla.; Rep. Andy Levin, D-Mich.; Rep. Pramila Jayapal, D-Wash.; and Rep. Brendan Boyle, D-Pa.

Sen. Patty Murray, D-Wash., the chair of the Senate Health, Education, Labor and Pensions Committee, and Senate Majority Leader Chuck Schumer, D-N.Y., introduced the Senate companion bill, which does not yet have a bill number.

The worker classification provision in the bill is similar to California’s AB 5 labor law, which was meant to keep Uber, Lyft and other new, “gig economy” employers from treating workers with little autonomy as independent contractors. Freelancers in other sectors have complained that the law interferes with their ability to operate as freelancers and might force them to take staff jobs, against their will.

What the PRO Act Bill Would Do

Some agents have sued insurers for the right to be classified as employees, to get access to the kinds of retirement benefits and other benefits typically reserved for an insurer’s employees.

NAIFA contends that, for many insurance producers and financial advisors, being reclassified as an employee could cause problems.

The PRO Act could complicate many insurance producers’ tax filing status, NAIFA says in an email sent to its members. The act also could disrupt prevailing insurance and financial services distribution models, NAIFA says.

Fans and Foes

Scott said in a comment in the bill introduction announcement, that the main provisions in the bill will shore up workers’ ability to join unions, and help workers and unions respond to a decades-long assault on workers’ rights.

That assault “has suppressed union membership and eroded America’s middle class,” Scott said. “The COVID-19 pandemic has demonstrated the urgent need for Congress to protect and strengthen workers’ rights. Over the past year, workers across the country have been forced to work in unsafe conditions for insufficient pay, because they lacked the ability to stand together and negotiate with their employer.”

Murray said the PRO Act bill would restore workers’ ability to “join together to demand their fair share of the economic growth they drive.”

The U.S. Chamber of Commerce is leading opposition to the bill, calling it “a litany of almost every failed idea from the past 30 years of labor policy.”

The Chamber’s employee policy division says in an analysis of the bill that the independent contractor classification provision could make it easier for workers to join unions. Under the current labor laws, “independent contractors are not eligible to unionize, which has been a source of great frustration for labor leaders,” the Chamber employee policy division says.

The Chamber employee policy division says that part of the independent contractor classification provision in the PRO Act bill is identical to the language in AB 5, but that the provision is missing the many exemptions included in AB 5.

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