Financial Services Institute Urges DOL to Rescind Independent Contractor Rule

The Financial Services Institute ("FSI") an association representing independent financial services providers, supported a DOL proposal to modify "wage and hour division" regulations governing whether a worker is an employee or an independent contractor.

In a comment letter, the FSI urged the DOL to rescind the 2024 independent contractor classification rule and restore the 2021 framework under the Fair Labor Standards Act ("FLSA").

The proposal would rescind the 2024 rule's open-ended, six-factor totality-of-the-circumstances test to determine whether a worker is economically dependent on an employer (and thus an employee entitled to minimum wage and overtime protections) or is in business for themselves. The FSI said the 2024 rule incorrectly treated government-mandated compliance requirements as evidence of an employment relationship, and systematically weighted each factor toward employee status. The FSI supported the restoration of the 2021 rule's "core factor" framework, which centered classification on two considerations: a worker's control over his or her work, and the worker's opportunity for profit or loss.

FSI argued the 2021 framework was more predictable, better grounded in Supreme Court precedent, and reduced litigation risk. FSI asserted that the 2024 rule was "improperly slanted toward employee classification," and that reclassifying independent financial advisors as employees would trigger widespread advisor retirements, raise the cost of retirement planning services, and reduce access to financial guidance in rural and underserved communities. FSI noted that independent contractors in the financial and insurance sectors own approximately 130,000 small businesses, employ approximately 330,000 people, and account for approximately $47 billion in industry output.