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Regulation and Compliance > Federal Regulation > DOL

FSI Resumes Legal Fight Over DOL Independent Contractor Rule

By Melanie Waddell

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With a new court filing, the Financial Services Institute and other groups have renewed their fight against the Labor Department’s independent contractor rule, which the department finalized Jan. 9.

The final rule defines whether a worker is an employee or independent contractor under the Fair Labor Standards Act. FSI has warned that the rule could threaten advisors’ status as independent contractors.

In 2021, under the Trump administration, the Labor Department streamlined the independent contractor rule. FSI has said it prefers this version of the rule “because of the clarity and security it provided independent advisors regarding their independent contractor status.”

The Biden Labor Department in 2022 proposed a new version of the rule. DOL officials say this version strengthens worker protections and is truer to the intent of the FLSA. Trade groups including FSI have been fighting the rule in court, arguing the department did not follow the law in rescinding the 2021 rule.

On Friday, FSI, along with the Coalition for Workforce Innovation, Associated Builders and Contractors, and Associated Builders and Contractors of Southeast Texas filed a motion for remand in the Fifth Circuit Court of Appeals, resuming the court battle, which was halted in June 2022 as the Labor Department requested a stay of appeal to work on the rule.

The motion requests the court lift the stay of appeal and remand the case to the U.S. District Court for the Eastern District of Texas “so that it may consider whether the DOL’s latest Independent Contractor Rule complies with the Administrative Procedure Act (APA) in the Department’s attempt to rescind and replace the 2021 Independent Contractor Rule,” the groups explained Tuesday in a statement.

Dale Brown, FSI’s president and CEO, has said that FSI fears that “the DOL’s final rule will undermine our financial advisor members’ independent contractor status, despite thousands of comment letters, multiple hearings and many meetings in which stakeholders, including our members, expressed their desire to remain independent.”

Labor sent its final independent contractor rule to the Office of Management and Budget for review in early October.

The notice on OMB’s website stated 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 new rule is scheduled to take effect March 11.

Melanie Waddell

@Think_MelanieW

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