Independent financial advisors in New Jersey could be reclassified as employees of their broker-dealers under a rule proposed by the state’s Department of Labor and Workforce Development, according to the Financial Services Institute.
The proposed rule (N.J.A.C. 12:11)would establish a so-called “ABC test” to determine whether a worker is classified as an employee or an independent contractor under state law.
The state will hold public hearing on on the proposal on Monday, June 23, and FSI plans to offer testimony opposing the rule.
According to Allison Mutschler, FSI Assistant Vice President, Marketing & Communications, under the ABC test, a worker is considered an employee, not an independent contractor, except in cases where the three of conditions of the ABC test conditions are met:
The worker is free from the control and direction of the putative employer
The worker performs work that is outside the usual course of business of the putative employer
The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed
Mutschler said in an email to Rethinking65 that the supervision requirements of securities laws could conflict with the conditions of the ABC rule.
New Jersey has the most stringent rules and application regarding independent contractors, Mutschler said. California has enacted an ABC test that exempts the financial services sector — a provision that FSI requested, she said.
Several other states also have a full or modified ABC test but have not applied it to affect independent financial advisors, Mutschler said.
The federal Department of Labor is not enforcing a Biden-era rule on independent contractors, but this would have no effect on New Jersey’s regulation if the rule is adopted, she said.
The New Jersey DOL will hold the hearing on Monday, June 23 from 10 a.m. to noon at the New Jersey Division of Taxation, 3 John Fitch Way, 1st Floor, Trenton, NJ.
To be included on the list of speakers, email the Office of Legal and Regulatory Services at david.fish@dol.nj.gov.
