The Department of Labor appears determined to withdraw the rule that clarified an independent contractor financial advisor’s status and “replace it with a proposal that we’re likely to find unacceptable,” according to David Bellaire, general counsel of the Financial Services Institute.
The DOL has withdrawn a Trump-era rule on the distinction between employees and independent contractors. The rule, which was finalized during the last few weeks of the Trump administration and was due to go into effect in May, reaffirmed an “economic reality” test to assess whether someone is an independent contractor or an employee and pinned the distinction on the nature and degree of control over the work and the person’s opportunity for profit or loss.
Days after the withdrawal, the FSI joined a complaint initially filed in March in the U.S. District Court for the Eastern District of Texas by the Associated Builders and Contractors, the Associated Builders and Contractors of Southeast Texas and the Coalition for Workforce Innovation to challenge the delay of the implementation of the rule. The amended complaint also challenges the withdrawal of the rule on the grounds that it “was issued arbitrarily, capriciously, and contrary to procedures required by law.”
The FSI believes the withdrawal of the rule “prevents independent financial advisors and firms from operating confidently knowing their independent contractor status is secure.” FSI’s members include more than 80 independent financial services firms and close to 30,000 independent financial advisors.
Bellaire, speaking at this week’s Insite 2021 conference organized by BNY Mellon’s Pershing, urged others in the industry to be proactive in engaging with regulators and legislators about issues that impact the financial services industry.
“It’s important that you stay informed, that you stay engaged, that you’re active with any of the trade associations you participate in,” he said. “You never know what kind of impact you can have when you’re engaged and involved.”
Bellaire said involvement “comes in all sizes” — from meeting with members of Congress to push back on legislation to having a five-minute conversation with a top regulatory executive.
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