The U.S. Chamber of Commerce is calling on the Department of Labor to scrap its independent contractor rule.
The DOL independent contractor proposal would make it harder for companies to treat workers as independent contractors, potentially upending several industries, including financial services. Controversy continues to follow the rule proposals, which affect various industries in different ways.
The DOL initially planned to close a comment period in November but tacked on an extra 15 days, extending the deadline until Dec. 13. According to Regulations.gov, the department received 49,734 comments on the proposed rule.
Marc Freedman is vice president, workplace policy for the Chamber of Commerce. He urged the DOL to discard the effort entirely.
"The independent contractor model is particularly vital to small businesses, which rely on independent contractors’ expertise to grow their businesses," Freedman wrote. "Because contracting reduces the importance of economies of scale, it allows small businesses to compete with larger ones."
Earlier this year, Secretary of Labor Marty Walsh spoke of small business growth during remarks to the U.S. Conference of Mayors: “In addition to retirements, we are also seeing more people go into business for themselves. In 2021, the number of self-employed workers grew by over seven percent.”
The independent contractor rule works against those aims, Freedman maintained.
"Against this backdrop, the department has proposed a rule that would not only lead to significant reclassification of independent contractors but would also lead to a considerable increase in litigation," he wrote. "The bias in favor of employee status, which appears throughout the Proposed Rule, makes the risk that independent contractors would be misclassified as employees especially acute."
The definitions of who is considered a company's employee, who is entitled to various legal protections, and who is an independent contractor have shifted over the past decade. Workers are increasingly turning to the courts, claiming they were misclassified.
Meanwhile, the DOL has made several attempts to clarify the rules across the Obama, Trump and Biden administrations.
The rule would replace a Trump administration regulation that says workers who own their own businesses or have the ability to work for competing companies, such as a driver who works for Uber and Lyft, can be treated as contractors.
The new proposal adopts a broader definition of who counts as an employee, mirroring legal guidance issued by the Obama administration that was withdrawn by the DOL under the Trump administration. Any changes could leave more employers responsible for complying with laws relating to FICA, health care, retirement plans and federal regulations that protect employees.
Sen. Patty Murray, D-Wa., chair of the Senate Committee on Health, Education, Labor, and Pensions, led 11 of her colleagues in signaling support for the rule in a letter.
"We support DOL’s proposal to reinstate the economic realities test to more closely align with congressional intent and Supreme Court jurisprudence,” the senators wrote. “The return to this test, which was in place for more than seven decades, will help ensure that all workers who are covered by the Fair Labor Standards Act’s legal protections, including minimum wage and overtime, are not deprived of its protections by misclassification."
The Financial Services Institute also called on the DOL to withdraw the rule in its letter.
Earlier this year, the Eastern District of Texas determined in a lawsuit brought by the FSI that the department’s Trump-era rule was not correctly removed by the Biden administration in a violation of Administrative Procedures Act. The rule is in force as of its original effective date of March 8, 2021.
The reinstated rule clarified a long-standing “economic reality test” to determine whether a worker is an employee or independent contractor under the Fair Labor Standards Act.
"Our members, inspired by the entrepreneurial spirit, have chosen to be independent contractors – many switching from an employee-based model – with the desire to build their own business, develop their own staff and provide high-quality, personalized service to their clients," said Dale Brown, president and CEO of FSI.
"Despite the DOL’s claims, the proposal would create uncertainty regarding many financial advisors’ independent contractor status. It would also impose burdensome costs on independent financial services firms and, ultimately, impact access to objective, professional financial advice for hard-working Americans."
Many of the thousands of comments came from independent real estate agents, financial professionals and others who wrote of their experiences being an independent contractor, or working with them.
John A. Barbish is president of Barbish Financial Group in Wickliffe, Ohio, and urged the DOL to exempt financial advisors.
"I am able to run my practice any way I see fit, just as any private practice attorney, CPA, etc.," Barbish wrote. "At the end of the day, average Americans will benefit from working with an independent broker compared to a captive/W2 employee of an insurance company or broker-dealer."
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.