The Financial Services Institute is among other industry groups that have filed the latest lawsuit challenging a Biden administration rule covering independent contractors.
The 2024 rule, finalized in January, makes it more difficult for companies to treat some workers as independent contractors rather than employees. A House of Representatives committee in late March approved a resolution to repeal the rule, but even if Congress approved the repeal, it would likely be vetoed by President Joe Biden.
The groups including the U.S. Chamber of Commerce, the country’s largest business lobby, said in a complaint filed in federal court in Beaumont, Texas, that the U.S. Department of Labor rule violated federal wage law by adopting too broad a definition of who counts as a company’s employee.
FSI and its coalition partners are asking the court to declare the 2024 Rule invalid, prohibit its implementation, and allow the 2021 Independent Contractor Rule to remain in effect.
“Our members should not have to risk losing their independent contractor status because, for example, they are complying with federal and state securities rules,” said FSI President & CEO Dale Brown. “The 2021 Independent Contractor Rule helped provide much-needed certainty and clarity regarding our financial advisor members’ classification as independent contractors. However, the 2024 Rule renews uncertainty, creating burdens for advisors and firms which ultimately increases costs and limits Main Street Americans’ access to professional financial advice, products and services.”
2024 Rule to Affect Many Industries
Employees are entitled to the minimum wage, overtime pay and other legal protections not afforded to contractors, and studies suggest that they can cost companies up to 30% more than contract workers.
The new rule, which takes effect March 11, is expected to have a broad impact on an array of industries including app-based services that rely heavily on “gig” workers to contain costs. At least four other challenges to the rule are pending, including lawsuits by freelance writers, trade groups and a trucking company that treats driver as independent contractors.
The new lawsuit also claims that the Labor Department violated a federal law governing rulemaking by agencies by failing to justify its reversal of a Trump administration rule favored by trade groups.
The business groups had sued the department in 2021 when it first attempted to repeal the Trump-era rule. A judge blocked the repeal, saying the agency had not adequately explained its decision. Tuesday’s filing came as an amended complaint in that case.
The Labor Department did not immediately respond to a request for comment.
The Labor Department has said that the rule is designed to clarify the standard for determining worker classification and crack down on industries where misclassification is common, such as construction, healthcare, retail sales and security and janitorial services.
Tuesday’s filing comes as Republicans in Congress are separately working to repeal the rule. Senator Bill Cassidy, a Republican from Louisiana, has said he plans to introduce a resolution under the Congressional Review Act to nix the rule.
Lawmakers would need a two-thirds majority to overcome a likely veto by Democratic President Joe Biden.
This article was provided by Reuters. Rethinking65 contributed to this article.
