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Regulation and Compliance > Federal Regulation > DOL

DOL Issues New Independent Contractor Rule

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The Labor Department released Tuesday a proposed rule that would replace the existing 2021 test under the Fair Labor Standards Act used to determine worker classification as either an independent contractor or an employee.

The new Labor rule would replace the 2021 rule that went into effect as a result of a ruling in March by the U.S. District Court for the Eastern District of Texas that Labor’s delay and withdrawal of its independent contractor rule violated the Administrative Procedure Act.

With the court’s decision, the independent contractor rule became effective as of March 8, 2021.

Labor’s new rule could threaten independent advisors’ ability to work as independent contractors, according to the Financial Services Institute, an advocacy group.

Labor’s new plan, an FSI spokesperson said Tuesday, “would result in a return to the confusing and conflicting interpretations by the courts similar to before the 2021 rule, causing independent financial advisors and firms to divert time and resources to defending their independent contractor classification.”

Dale Brown, president and CEO of the Financial Services Institute, added in a statement the group is “thoroughly reviewing the proposed rule as it is imperative to preserve independent financial advisors’ ability to choose to be independent contractors and provide the same level of certainty and clarity the existing rule provides independent advisors.”

FSI explained Tuesday that the 2021 rule “clarified independent financial advisors’ independent contractor status and provided consistency in worker classification.”

The new proposal, according to Labor, “would provide guidance on classifying workers and seeks to combat employee misclassification.”

Labor is taking comments on the plan from Thursday until Nov. 28.

Labor Secretary Marty Walsh said Tuesday in a statement that “while independent contractors have an important role in our economy, we have seen in many cases that employers misclassify their employees as independent contractors, particularly among our nation’s most vulnerable workers.”

Misclassification, Walsh said, “deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages.”

Brown says FSI looks forward “to constructively engaging with DOL staff to ensure advisors’ independent contractor status is protected.”

However, Brown said, “the limited time between the DOL’s townhalls, when it filed the rule with the Office of Management and Budget, and today’s release raises concerns about how much consideration, if any, the Department gave to the feedback it received from American workers and employers.”

The department said it “believes the new rule would preserve essential worker rights and provide consistency for regulated entities.”


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