On October 26, NAIFA filed comments on the Department of Labor’s (DOL) proposed interpretation dictating which workers can qualify for independent contractor status under the Fair Labor Standards Act (FLSA). NAIFA supports DOL’s efforts to formalize existing interpretations, provide greater certainty for the regulated community, and promote opportunities for creating innovative work arrangements.
Across the country, at the federal and state level, legislatures are debating proposals that would presumptively classify all workers as employees under the so-called “ABC Test.” Under the ABC Test, workers will qualify as independent contractors only if they affirmatively satisfy three conditions (i.e., they are free from the control and direction of the hirer under the contract and in fact; they perform work outside the usual course of the hiring entity’s business; and the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed). As the Department notes in the proposed rule, adoption of such a test is too restrictive and could result in a large-scale reclassification of many independent contractors as employees under the FLSA.
In response, the Department’s proposal seeks to clarify and codify the circumstances under which a worker will qualify as an “employee” or an “independent contractor” under the FLSA by adopting existing interpretations to which courts and DOL have long adhered. Specifically, under the proposed rule, the central inquiry will turn on whether, “as a matter of economic reality,” the individual is economically dependent on the potential employer for work (i.e., a worker economically dependent on the potential employer for work will qualify as an employee, while workers in business for themselves will be classified as independent contractors).
NAIFA is actively involved in the independent contractor discussion with both legislators and regulators and continues to work with government officials and partners to help establish common sense rules that benefit financial advisors, insurance producers, and all Americans in the workplace.