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Financial Services Groups Still Fear Labor Bill

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What You Need to Know

  • In the past, some agents have asked the courts to classify them as insurance company employees.
  • Many financial services professional groups are fighting the PRO Act.
  • Joe Manchin is one of the 46 co-sponsors of the Senate version, S. 420.

Financial services industry groups are continuing to fight hard against the Protecting the Right to Organize (PRO) Act, even though supporters seem to be having a hard time rounding up enough support to get it through the Senate.

The PRO Act bill would change federal labor rules.

One section would expand the definition of “employee” for purposes of determining who can join a union. The section would include the financial advisors who are now classified as independent contractors in the definition of employee.

PRO Act Basics

Members of the House passed their version of the bill, H.R. 842, March 9, by a 225-206 vote.

Sen. Patty Murray, D-Wash., introduced the Senate version, S. 420, in February. That version now has 46 co-sponsors, all Democrats. One of the co-sponsors of the Senate version is Joe Manchin, a Democrat from West Virginia who is known for his independence.

However, no senator has joined as a co-sponsor since April.

But the committee Murray heads — the Senate Health, Education, Labor and Pensions Committee — held a hearing on the bill last week.

Financial services groups sent Murray and the highest-ranking Republican on the panel, Sen. Richard Burr, R-N.C., a letter asking them to change the independent contractor provision.

Professional Options

The letter said that currently financial services professionals can choose whether to be employees of insurers, broker-dealers or RIAs, or independent contractors.

Many financial services professionals who work as independent contractors have written agreements with insurers or other companies that define those individuals’ independent contractor status, the groups added.

“It would be enormously disruptive to negate these agreements through federal legislation,” the groups said. “By effectively reclassifying independent contractors as employees, the PRO Act would create unintended consequences for the industry, and specifically insurance producers and independent financial advisors.”

The number of financial services groups signed the letter. These include the American Council of Life Insurers, the American Property Casualty Insurance Association, the American Securities Association, Finseca, the Council of Insurance Agents and Brokers, the Financial Services Institute, the Independent Insurance Agents and Brokers Association of America, the Insured Retirement Institute, the National Alliance of Life Companies, the National Association for Fixed Annuities, the National Association of Health Underwriters, the National Association of Independent Life Brokerage Agencies, the National Association of Insurance and Financial Advisors, the National Association of Mutual Insurance Companies, the National Association of Professional Insurance Agents and the Securities Industry and Financial Markets Association.

The Hearing

Jyoti Sarolia was the only witness who spoke against S. 420 Thursday, at the Senate HELP hearing on the bill.

Sarolia is the principal and managing partner at Ellis Hospitality, a hotel management company based in Temecula, California. She appeared at the hearing on behalf of the International Franchise Association.

“The PRO act is the most anti-small-business bill in the history of Congress,” Sarolia testified at the hearing, which was streamed live on the web. “With the stroke of a pen upon enactment, the PRO Act’s joint employer and independent contractor provisions alone would steal the American dream of business ownership from countless entrepreneurs.

“I’m here to testify on behalf of all the bakers, physical therapists, realtors, freelancers, truck drivers, doctors, caterers, ride share drivers, insurance agents, salespeople, commercial fishermen, stylists and many more who contribute so much to the economy and whose livelihood the PRO Act could upend.”

The act could hurt some business owners through the unionization provisions, and it could also turn people who have been proud of being small-business owners into employees of big companies, Sarolia said.

“Why would 47 senators seek to consolidate so much corporate power at the expense of small business owners like me?” Sarolia asked. “Put simply, this legislation could end the franchise business model — the business format that has perhaps provided the most accessible path to business ownership for entrepreneurs of all backgrounds.”

S. 420 Might Be Alive

Murray appears to be having trouble getting 50 senators to back S. 420, let alone the 60 votes needed to get an ordinary bill to the floor of the Senate.

But Finseca, for example, says that it wants to do its best to change the independent contractor provisions because of talk that some Democrats are hoping to make the PRO Act part of a budget reconciliation bill or other must-pass bill.

A budget reconciliation bill could get through Congress with just 51 votes in the Senate, including a tiebreaking vote cast by Vice President Kamala Harris, who serves as the president of the Senate.

PRO Act supporters might be able to get the bill through Congress with even less support by adding it to a must-pass budget, spending or federal debt ceiling increase bill.

Pictured: Sen. Patty Murray, D-Wash. (Photo: Diego M. Radzinschi/ALM)