DOL Releases Final Independent Contractor Rule
The U.S. Department of Labor yesterday released its final independent contractor rule that defines whether a worker is an employee or independent contractor under the Fair Labor Standards Act.
The rule provides guidance on proper classification and seeks to combat employee misclassification and the compromising of workers’ rights to minimum wage and overtime pay. Proponents of the rule assert that independent contractor classification often facilitates wage theft, allows some employers to undercut their law-abiding competition, and hurts the economy at-large.
As previously reported in The DI Wire, the Financial Services Institute – a trade organization that represents independent financial advisors – battled the DOL proposal since its introduction charging that the rule will cause investors to lose access to affordable and professional financial advice and services.
“While we continue to analyze and review the rule, Financial Services Institute remains committed to preserving independent financial advisors’ ability to choose to operate as independent contractors,” said Dale Brown, FSI president and CEO.
“We fear 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. Independent financial advisors are entrepreneurs who have built a strong presence in their communities, own their own businesses, pay business taxes and hire their own staff. If they are forced to be employees, this could adversely harm Main Street Americans’ access to their local trusted financial advisor. The independent contractor status is vital to our members, and FSI is ready to leverage all our advocacy tools to ensure it remains protected,” added Brown.
The rule, which will take effect on March 11, 2024, replaces the DOL’s 2021 rule that FSI supported because of the clarity and security it provided independent advisors regarding their independent contractor status.
The new “independent contractor” rule restores the multifactor analysis used by courts for decades, ensuring that all relevant factors are analyzed to determine whether a worker is an employee or an independent contractor. The rule addresses six factors that guide the analysis of a worker’s relationship with an employer, including any opportunity for profit or loss a worker might have; the financial stake and nature of any resources a worker has invested in the work; the degree of permanence of the work relationship; the degree of control an employer has over the person’s work; whether the work the person does is essential to the employer’s business; and a factor regarding the worker’s skill and initiative.
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