The Labor Department has issued a field assistance bulletin directing agency investigators not to enforce the Biden-era independent contractor rule. A trade group representing independent financial advisors cheered the move.
While Labor reviews the 2024 final rule, Employee or Independent Contractor Classification Under the Fair Labor Standards Act — which is also being challenged in federal court — "agency investigators are directed not to apply the 2024 rule’s analysis in current enforcement matters," Labor said.
The 2024 rule went into effect in March 2024. This is the first move by DOL to pause enforcement of the rule.
The Financial Services Institute and its coalition partners are suing Labor over the rule, asking the court to declare it invalid, prohibit the rule's implementation and allow the 2021 independent contractor rule to remain in effect. On April 29, the court granted Labor's motion for a temporary suspension to provide DOL sufficient time to "reconsider the regulation."
FSI welcomes Labor's decision "not to apply the Biden Administration’s unworkable standard for determining worker classifications," Robin Traxler, senior vice president of policy and deputy general counsel, told ThinkAdvisor Friday in an email.
Labor said that it will rely on "longstanding principles outlined in Fact Sheet #13 and further informed by the reinstated Opinion Letter FLSA2019-6, which addresses classification in the context of virtual marketplace platforms. This approach provides greater clarity for businesses and workers navigating modern work arrangements while legal and regulatory questions are resolved."
Labor said its new guidance does not change existing regulations "but reflects how the department is allocating enforcement resources during the review of the 2024 rule. The FAB supersedes any prior or conflicting guidance provided to Wage and Hour Division staff on enforcement related to independent contractor misclassification. The department may still exercise enforcement authority in individual cases deemed appropriate by the Wage and Hour Administrator or a designee."
Independent advisors "have lacked security in their choice to be independent contractors for far too long," Traxler said. "They choose independence so that they can run their own businesses and better serve their clients. We look forward to the day our members can have the same clarity and confidence in their independent contractor classification as they did under the 2021 independent contractor rule. We will continue to advocate on their behalf until their independent contractor status is secure."
Last January, FSI and the coalition 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.
Under the first Trump administration, the Labor Department streamlined the independent contractor rule.
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.
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