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DOL Releases Final Independent Contractor Rule

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What You Need to Know

  • The rule defines whether a worker is an employee or independent contractor under the Fair Labor Standards Act.
  • FSI warns that the rule could threaten advisors' status as independent contractors.
  • Acting Labor Secretary Su says the rule provides guidance on proper classification and seeks to combat employee misclassification.

The Labor Department released Tuesday its final independent contractor rule that defines whether a worker is an employee or independent contractor under the Fair Labor Standards Act. The Financial Services Institute warns that the rule could threaten advisors’ status as independent contractors.

“Misclassifying employees as independent contractors is a serious issue that deprives workers of basic rights and protections,” acting Labor Secretary Julie Su said Tuesday in a statement. “This rule will help protect workers, especially those facing the greatest risk of exploitation, by making sure they are classified properly and that they receive the wages they’ve earned.”

Dale Brown, president and CEO of the Financial Services Institute, said Tuesday in a statement that while FSI continues “to analyze and review the rule, FSI remains committed to preserving independent financial advisors’ ability to choose to operate as independent contractors.”

FSI, Brown continued, fears “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. FSI has been a staunch critic of Labor’s new rule, which replaces Labor’s 2021 rule.

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.”

FSI said Tuesday that it supported the 2021 rule “because of the clarity and security it provided independent advisors regarding their independent contractor status.”

Independent financial advisors, Brown said, “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 rule, according to Su, “provides guidance on proper classification and seeks to combat employee misclassification, a serious problem that impacts workers’ rights to minimum wage and overtime pay, facilitates wage theft, allows some employers to undercut their law-abiding competition and hurts the economy at-large.”

The guidance provided by the final rule, Su explained, “aligns with longstanding judicial precedent on which employers have previously relied to determine a worker’s status as either an employee or independent contractor,” and “will preserve essential worker rights and provide consistency for entities covered by the Fair Labor Standards Act.”

Labor explained that 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.”

It addresses six factors that guide the analysis of a worker’s relationship with an employer, Labor stated. They include:

  • 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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