Compliance March 5, 2024

Financial Services Institute, Peers Challenge DOL’s Independent Contractor Rule

The rule would make it much harder to classify workers, including financial advisers, as independent contractors.

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A coalition of trade groups that includes the Financial Services Institute has challenged the Department of Labor’s new independent contractor rule, set to take effect on March 11, by filing an amended complaint to a 2021 lawsuit. The case is being heard in U.S. District Court for the Eastern District of Texas and includes FSI and other plaintiffs, including groups such as the Coalition for Workforce Innovation and the business advocate U.S. Chamber of Commerce.

The rule, as proposed, would make it easier for workers to be classified as employees rather than independent contractors, which would entitle them to protections under the Fair Labor Standards Act, such as a minimum wage and overtime pay, as well as many protections under the Occupational Safety and Health Act.

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The amended complaint alleges that the rule violates the Administrative Procedures Act and is arbitrary and capricious. It also alleges that the new rule did not adequately consider the costs of implementing it, both to businesses and workers.

The amended complaint reads: “The 2024 Rule abandons [a] workable framework and replaces it with a totality-of-the-circumstances test that is unlawful, unclear, and inappropriately biased toward classifying workers as employees, in conflict with binding Supreme Court precedent.”

In February 2021, the DOL postponed the implementation of a similar rule that was finalized during the administration of former President Donald Trump to May 2021; that rule would have made it easier to classify workers as contractors. In 2021, under then-Secretary of Labor Marty Walsh, withdrew that rule. That withdrawal was vacated by the U.S. District Court for the Eastern District of Texas in 2021 as being arbitrary and capricious because of the ambiguity of revoking one rule without a clear replacement, as well as for not accounting for compliance costs. Therefore, the Trump-era rule went into effect.

In response, the DOL proposed in October 2022 another rule, which was finalized this January. The amended complaint seeks to challenge that new rule and asked the court for a stay on the new rule’s implementation.

The court has not yet ruled on the amended complaint.
Compliance March 5, 2024

5 New Members Appointed to ERISA Advisory Council

The 15-member panel comes from the retirement and investment industry and advises the Department of Labor on ERISA-related issues.

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The ERISA Advisory Council has appointed five new members to its 15-member council as part of its staggered three-year term cycle.

The council advises the Department of Labor on policies and regulations affecting employee benefit plans regulated under the Employee Retirement Income Security Act. The members represent different interest groups and industries related to retirement and investing: three each representing employers, employee organizations and the general public; and one each for accounting, actuarial counseling, corporate trust, insurance, investment counseling and investment management.

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The new members are:

  • Regina T. Jefferson (general public) is a professor of law at the Catholic University of America’s Columbus School of Law with more than 30 years of experience teaching ERISA and tax-related courses;
  • Kathleen McBride (investment management) is the founder and president of FiduciaryPath LLC and an accredited investment fiduciary analyst;
  • Anusha Rasalingam (employee organizations) is a partner in Friedman and Anspach, Attorneys at Law and has 20 years of experience in employee benefits law. She advises on health care and retirement benefits issues for single and multiemployer plans and counsels on compliance with multiple areas of ERISA;
  • William E. Ryan III (corporate trust) is the head of defined contribution for investment consultant New England Pension Consultants LLC; and
  • Charles B. Wolf (employers) is a retired shareholder in the law firm Vedder Price PC and teaches employee benefits law at the University of Chicago Law School.

Additionally, current council member Mayoung Nham will become council chair in 2024; she is a principal in the Slevin & Hart law firm. Current member Shaun C. O’Brien will become the vice chair and is a policy director for the American Federation of State, County and Municipal Employees.

The new members will be replacing:

  • Megan Broderick (employers), retired, senior director for global retirement plans and financial wellbeing, PepsiCo;
  • Dave Gray (corporate trust), head of workplace retirement platforms, workplace investing, Fidelity Investments;
  • Marcelle J. Henry (employee organizations), partner and chairperson of the ERISA/Employee Benefits Group at Pitta LLP;
  • Mercedes D. Ikard (general public), director of integrated benefits operations, the Walt Disney Co.; and
  • Edward A. Schwartz (investment management), president, Schwartz & Co. in Bloomfield Hills, Michigan.

The council’s first meeting of 2024, which will be open to the public, will take place on May 14.

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