A comment letter submitted by NAIFA President Lawrence Holzberg, LUTCF, LACP, on behalf of the association to the U.S. Department of Labor urges the department to provide an exemption or carve-out for financial professionals in a proposed rule on employee or independent contractor classification under the Fair Labor Standards Act.
Independent insurance producers, brokers, and financial advisors have a long history of being independent contractors and not employees under state and federal labor laws. These professionals are highly trained, highly educated, highly regulated professionals who often own their own small businesses and assume the risks and rewards of doing so. They maintain their own offices, purchase their own insurance, hire employees, pay employment taxes, and purchase workers’ compensation insurance for their employees. They enter into written agreements with insurance companies and independent broker-dealers that carefully set forth the terms of their independent contractor status.
NAIFA believes the proposed DOL rule, as it currently stands, would misclassify many independent insurance agents and brokers as “employees.” Making this particularly problematic is the fact that insurance professionals often have relationships with multiple insurance companies and financial institutions. Their status as independent contractors allows them to provide a variety of options to consumers and work in the best interests of their clients. Failure to exempt independent insurance producers, brokers or financial advisors from the DOL proposal “severely limits the scope of insurance products consumers would have access to as well as the general distribution of insurance products and investment advice, thereby limiting consumers’ ability to protect themselves and their loved ones,” the letter states.
The letter concludes that “NAIFA appreciates the well-intended efforts at DOL to reduce employee misclassification. However, the proposed rule is misguided in its broad inclusion of the insurance industry. Many of the rule’s provisions would fundamentally change the way independent insurance agents, financial advisors, and brokers operate and could result in a mass exodus of insurance professionals that operate on a 1099 model leaving the industry. We ask that DOL either reconsider the proposal by limiting the number of factors that independent contractors are evaluated on or providing a carve-out for professionals working within the insurance industry to ensure they may continue serving their clients in the most effective way possible.”