10.11.22

DOL Looks to Restrict Ability to Treat IBD Reps as Independent Contractors

by: Tracey Longo

The U.S. Department of Labor (DOL) has proposed a rule that would make it more difficult for independent broker-dealers (IBDs), insurers and other firms to treat professionals who want to self-label as independent contractors. The proposal would require that workers be considered a company’s employees, who are entitled to more benefits and legal protections than contractors, when they are “economically dependent” on the firm. The new rule, which will take at least several months to finalize, would replace a Trump-era regulation that says workers who own their own businesses or have the ability to work for competing companies can be treated as contractors. The Trump-era rule clarified independent financial advisors’ independent contractor status under the Fair Labor Standards Act. The Financial Services Institute, which represents the independent broker-dealer industry, sued the DOL and won in May, preventing the agency from revoking the 2021 rule. The DOL appealed the lawsuit but then decided that proposing a new rule was a better legal workaround.

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