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Regulation and Compliance > Federal Regulation > DOL

Final DOL Independent Contractor Rule Lands at OMB

By Melanie Waddell

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The Labor Department has sent its final independent contractor rule to the Office of Management and Budget for review.

DOL had projected that it would finalize the rule in May.

OMB reviews can take up to 90 days.

The notice on OMB’s website states that the DOL “continues to believe that the 2021 IC Rule does not fully comport with the FLSA’s text and purpose as interpreted by courts and has proposed to rescind the 2021 IC rule and set forth an analysis for determining employee or independent contractor status under the Act that is more consistent with existing judicial precedent and the Department’s longstanding guidance prior to the 2021 IC rule.”

The Financial Services Institute has maintained that the new rule should be withdrawn.

The DOL released on Oct. 11 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 rule, if finalized, would cause “independent financial advisors and firms to divert time and resources to defending their independent contractor classification,” FSI said at the time.

David Bellaire, FSI’s general counsel, told ThinkAdvisor Wednesday that FSI is “ready to review and analyze DOL’s independent contractor rule once it is published. While we hope it preserves the clarity provided by the 2021 rule and maintains independent advisors’ classification as independent contractors, we are prepared to take the necessary measures to defend advisors’ choice to operate as independent contractors if the rule does not.”

As the OMB notice states, on Jan. 7, 2021, the DOL published a final rule on independent contractor status under the FLSA.

Labor subsequently published final rules to delay and withdraw the 2021 rule on March 4, 2021, and May 6, 2021, respectively.

On March 14, 2022, a district court in the Eastern District of Texas vacated the DOL’s delay and withdrawal rules, concluding that the 2021 independent contractor rule became effective as of March 8, 2021.

DOL has appealed the district court’s decision, and published an notice of proposed rulemaking on Oct. 13, 2022.

Melanie Waddell

@Think_MelanieW

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