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Worker Classification


There have been recent legislative attempts, at both the state and federal level, to reclassify independent contractors by establishing an ABC test. The test sets a rigid standard that would require insurance agents and advisors to become W-2 employees of every carrier they’re connected to. NAIFA strongly supports a carve out for insurance agents, brokers and licensed insurance organizations and security brokers from any legislative proposal to enact an ABC test on independent contractors.

Under the ABC test, a worker is considered an employee and not an independent contractor, unless the hiring entity satisfies all three of the following conditions:

  1. The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
  2. The worker performs work that is outside the usual course of the hiring entity’s business; and
  3. The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

The 1099 status is vital to the insurance and financial services industry. If that were to be removed, it would revolutionize the industry for the wrong reasons. NAIFA members who operate as independents would lose the ability to make their own decisions and run their own businesses.

In March 2022, the National Council of Insurance Legislators (NCOIL) unanimously approved a NAIFA-backed resolution supporting independent contractor status for insurance agents and other licensed financial professionals. This resolution has been referred to on both the state and federal levels when discussing this issue.


In Congress, federal legislators have once again introduced the Protecting the Right to Organize Act (PRO Act). In the House, the PRO Act continues to sit in Committee, while the Senate has passed the bill out of committee and awaits a floor vote. Using an “ABC” test to determine who is an independent contractor, the PRO Act would cause significant industry disruption that would affect consumers’ access to insurance, investment, and retirement security solutions. Allowing insurance and financial services producers to retain the option to operate under an independent contractor status is vital to the industry.


The Department of Labor (DOL) has also recently proposed a new worker classification rule. Without clarity, changes to the current federal independent contractor standard could be unnecessarily detrimental to the insurance industry. In a comment letter to DOL in December 2022, the U.S. Small Business Administration’s Office of Advocacy stated that “DOL’s proposed rule may be detrimental and disruptive to millions of small businesses that rely upon independent contractors as part of their workforce.” Any regulatory action that redefines the relationship shared between insurance producers, independent broker-dealers, and independent financial advisors with the insurance industry would have wide-sweeping negative effects.

In conclusion, NAIFA opposes the PRO Act and any proposal seeking to redefine independent contractors. If such proposal is introduced, there should be an exemption for insurance and financial professionals from laws or regulations that include an ABC test or similar methods to determine whether a worker is a classified as a contractor or employee.  NAIFA believes the current independent contractor relationship to ensure consumers have the greatest access to products, services, and advice should stay in tact.