FSI seeks to reboot suit to stop DOL independent contractor rule

investmentnews.com:

One of the leading opponents of a Department of Labor rule that could affect the employment status of independent financial advisors is attempting to reboot a lawsuit to stop the regulation.

The Financial Services Institute, which represents independent broker-dealers and financial advisors, joined three other trade associations last Friday in filing a motion in the 5th Circuit Court of Appeals asking the court to send a lawsuit against DOL that has been on hold there to the U.S. District Court for the Eastern District of Texas.

The lawsuit centers on DOL action in early 2021 to delay and then withdraw an independent-contractor rule promulgated by the Trump administration on January 7, 2021. When the Biden administration took office, it removed the regulation with the intention of proposing its own regulation designed to stop companies from inappropriately deeming employees as independent contractors.

The trade groups filed a lawsuit in March 2022 in a Texas federal district court challenging the delay and withdrawal of the Trump contractor rule, whose test for independent contractor status they support. The groups claimed that the Biden administration’s scuttling of the rule violated federal rulemaking law, the Administrative Procedure Act.

The district court vacated the delay and withdrawal rules. But the DOL appealed that ruling to the 5th Circuit in May 2022 and then released a new proposal in October 2022. The 5^th Circuit decided to stay the lawsuit until completion of the rulemaking.

Last week, the DOL released the final independent contractor rule, which replaces the Trump regulation. The trade groups’ motion asks the 5^th Circuit to send its suit back to the district court so that the lower court can determine