On September 28, the Department of Labor’s (DOL’s) Wage and Hour Division (WHD) sent to the White House’s Office of Management and Budget (OMB) for pre-release review (and authorization to release) its final new rules on worker classification.
Typically, OMB (through its Office of Information and Regulatory Affairs (OIRA)) takes 60 to 90 days to approve (sometimes with modifications) rules (proposed or final) that an agency wants to release. But an OIRA decision could come sooner or later than that average of 60 to 90 days.
Generally, the final rule, assuming it is approved by OIRA, would replace the current rule that emphasizes two of five factors used to determine whether a worker is an employee or an independent contractor. Those two factors are the nature and degree of control exercised over the work to be performed, and the worker’s opportunity for profit or loss depending on management skill.
Under the new rule, six factors—all equally important—would be used to make the determination. The six factors include looking at whether the worker is economically dependent on the entity contracting for the work/service, the worker’s opportunity for profit or loss depending on managerial skill, the nature, and degree of control over the work exercised by the hiring firm or the worker, the degree of permanence of the work relationship, whether the work performed is an integral part of the employer’s business, and the worker’s skill and initiative.
NAIFA, along with its allies among insurers and some financial services firms, has been pressing hard for a carve-out for insurance and financial advisors, citing the unique nature and rigorous regulation to which advisors are subject. It is not yet known whether the final rule would in fact acknowledge the special circumstances that make it inappropriate to impose the general rule on financial and insurance advisors.
Prospects: Chances are good that OIRA will authorize WHD to issue the final worker classification rule, perhaps as modified after considering the hundreds of comments the agency received on its proposed rule. However, regardless of what the final rule consists of, most Washington insiders think the final rule will be challenged in court. Thus, final resolution of the issue could be months into the future.
NAIFA Staff Contact: Michael Hedge – Senior Director – Government Relations, at mhedge@naifa.org.