The Financial Services Institute, a brokerage advocacy group, has joined a lawsuit against the US Department of Labor alleging that DOL’s recent withdrawal from the independent contractor rule is in violation of federal law. FSI CEO and President Dale Brown described the move as “hasty and arbitrary”.
FSI, which advocates and advocates for independent brokers / dealers, joined the lawsuit in federal court in the Eastern District of Texas. Other plaintiffs include the Associated Builders and Contractors, the Associated Builders and Contractors in southeast Texas, and the Coalition for Workforce Innovation.
The rule, which would have cemented the independent contractor status of IBD consultants under the Fair Labor Standards Act, was originally announced to the Trump administration in the last few weeks, but its entry into force has been delayed by the Biden administration. On March 12, DOL proposed withdrawing the rule as it was inconsistent with the Fair Labor Standards Act and would have a “confusing and disruptive effect” on workers and companies. DOL Secretary Marty Walsh said employees often lose “critical wages and related safeguards” when an employer tries to classify them as independent contractors.
However, in a statement detailing the role of the FSI in the new complaint, Brown argued that the new rule would have allowed independent financial advisors to have a “consistent and consistent classification of workers.”
“Our members relied on this to ensure their decision to be independent contractors was upheld,” said Brown. “The Withdrawal of the Rule is returning to the confusing and conflicted interpretations previously applied by disparate courts, leaving our members and other properly classified independent contractors time and resources to defend their independent contractor classification from unnecessary challenges distract. “
FSI had previously submitted a letter of opinion in support of the rule, arguing that the “economic reality” test would help classify employees better compared to independent contractors under the FLSA. The rule would assess the classification of a worker according to his “type and degree of control over the work” as well as “profit or loss potential due to initiative and / or investment”, according to a statement on the DOL website.
In his statement, Brown noted that independent consultants build businesses in their communities, pay their own taxes, hire people, and depend on the success of their business.
“Independent financial advisors choose to be independent contractors – many of them are voluntarily switching from an employee adviser model – so that they can run their own business and better serve their customers,” he said.
There are also potential laws in the form of the PRO Law, which was passed in the House of Representatives in March. President Joe Biden recently called on the Senate to consider passing it. This bill could affect the independent contractor status of consultant-affiliated IBDs as well as insurance companies.