An advocacy organization for independent broker/dealers warned against legislation designed to limit the independent contractor status of many financial advisors after President Joe Biden pushed forward on the bill during his first State of the Union address to Congress. urged.
In a speech touching on Russia’s invasion of Ukraine, inflationary pressures and the ongoing impact of the COVID-19 pandemic, Biden briefly mentioned support for the Right to Organize (PRO) Act, which advocates Says will promote safety for workers. and allow employees to union freely, should they choose.
“And let’s pass the PRO Act,” Biden said Addressing Congress on Tuesday. “When most workers want to form a union, they should not be stopped.”
The Financial Services Institution, which lobbies Congress on behalf of the broker/dealer industry, retaliates in a statement by CEO and President Dale Brown, criticizing the potential impact of the PRO Act on consultants in the IBD channel, many who operate as independent contractors. Brown said many members voluntarily moved from a staff advisory position to gain more autonomy in their business.
“The PRO Act, as it is currently written, threatens to nullify that option,” he said. “We call on lawmakers and the administration to recognize the unique nature of the independent financial services model and to preserve the independent contractor classification of consultants in the PRO Act and all other worker classification rules.”
pro act Originally passed in the US House of Representatives in early 2020, but has since stalled in the US Senate, and could be even more difficult to pass in the coming year due to midterm congressional elections this fall. To determine an employee’s independent contractor status, the PRO Act would use the “ABC” factor test employed in similar legislation in California — although that rule included a carving out for financial advisors.
According to the test, an employee was an employee unless they were “free of control and direction with the performance of the service, both under contract for the performance of the service and, in fact, that the service was “performed outside the normal course”. “of the business of the employer,” and that the worker “was engaged in an independently established trade, occupation, profession or occupation of the same nature as was involved in the service.”
According to David Belair, FSI’s executive vice president and general counsel, although the act hasn’t moved to the Senate, it could be combined with other bills.
“What we have always been concerned about is that some form of legislation has to be passed, and parts of the PRO Act or the PRO Act will be added to it, making it very difficult to prevent a bill from becoming a law. Will go,” he said. “That’s why we’ve been very engaged with Capitol Hill on this issue.”
It is not only legislators who are asking these questions; Last year, Labor Department with a rule Announced during the final weeks of the Trump administration that, among other effects, IBD would strengthen the independent contractor status for consultants.
The DOL argued that the rule was inconsistent with the Fair Labor Standards Act, with Labor Secretary Marty Walsh saying that employees often lose “significant pay and related protections” if an employer classifies them as independent contractors. Critics of the rule also argued that gig and contract workers would have a harder time advocating for minimum wage income and overtime protections if it were enacted, according to the Washington Post, In response, the FSI joined the plaintiffs. In a lawsuit filed in Texas federal court Claiming a return of DOL is a violation of federal law.
To be sure, the outlook for the bill remains uncertain, and passage of controversial legislation could be even further away in the course of a year, including midterm congressional elections, which are coming up this fall. But Bellaire believed there was a widespread understanding that FSI members had abandoned the employee-based model because they wanted to run their own business as they saw fit.
“There’s a lot of sweat equity in these businesses that independent financial advisors don’t want to lose,” he said. “They understand what business they do in terms of employee benefits, but they overestimate their independence.”