Judge Says Insurance Agents Are Not Independent Contractors

by Norman B. Blumenthal on September 11, 2017

blumenthal nordrehaug & bhowmik, southern california employment law, southern california employment law attorneys, independent contractors, misclassification, misclassified as independent contractors, misclassification suitClose to 7,000 insurance agents certified as a class sought recompense for being misclassified as independent contractors by American Family Insurance Company. An Ohio federal judge ruled early August 2017 that they are in fact employees under the Employee Retirement Income Security Act. The judge stated that the company’s conduct showed a level of control over the agents’ work that was typical of an employer/employee relationship.

After a 12-day bench trial analyzing whether or not a group of insurance agents are employees under ERISA, U.S. District Judge Nugent accepted a nonbinding recommendation from an advisory jury that agents had been misclassified as independent contractors. Throughout the analysis of the relationship between American Family and its agents, the judge found that the company retained some degree of control over their work, directly or indirectly through managers placed in supervisory positions. Agents who didn’t meet or exceed insurer expectations and directives would receive reprimands, and threats of potential job loss.

In this way the company controlled job performance as well as employment opportunities. This was the most important of the factors considered in the case. The degree of control managers had access to and were encouraged to use was also considered. It was decided that the degree of control accessible and used in the workplace was not consistent with an independent contractor classification, but was more typical of the level of control expected from a manager/employee relationship. This, and other evidence, supports the finding that American Family agents as defined in the class description were misclassified as independent contractors.

The judge also stayed the case, authorizing the insurer to file an interlocutory appeal, stating that doing so could advance the eventual termination of litigation. He noted that an immediate appeal was warranted due to evidence existing on both sides of the argument being considered before the court, which would make assessing damages particularly difficult. Because prior case law has been close to unanimous in finding that insurance agents should be classified as independent contractors, this ruling could have far reaching implications in the industry.

If you need to discuss misclassification as an independent contractor with an experienced lawyer, get in touch with the employment law attorneys at Blumenthal, Nordrehaug & Bhowmik.

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