Jury Finds Insurance Agents to be Employees

Yingtao Ho

In the case of Jammal v. American Family Mutual Insurance in the Northern District of Ohio, a group of American Family insurance agents sued claiming that they are employees within the meaning of the Employee Retirement Income Security Act of 1974, so that they are entitled to sue for statutory benefits against American Family. American Family defended against the lawsuit by claiming it had always treated its insurance agents as independent contractors, and that its insurance agents were in fact independent contractors. On April 17, 2017, a jury found that the insurance agents were employees of American Family. The judge in the case still has to decide whether to accept the jury’s verdict. Total potential employer liability to the 7,000 plaintiffs may exceed $1 billion.

Earlier in the Jammal case, the judge granted the Plaintiffs’ motion for class certification, finding that the issue of whether American Family was the agents’ employer can be determined in a single proceeding. Key to the Court’s decision is its finding that American Family is the agents’ employer if it has the right to determine the manner of the agents’ work performance, regardless of whether the right has ever been exercised. The Court found that American Family’s right to determine the manner of the agents’ performance can be determined based on American Family’s own documents.

Wisconsin follows the exact same standard in distinguishing between employees and independent contractors. Someone may be an employee, so long as his employer has the right to control the manner of his work performance, even if the employer has always classified the person as an independent contractor rather than an employee. The right to control the employee’s work performance is sufficient to establish employee status, regardless of whether the right to control is ever exercised. In practice, employers wish to regulate how people that they designate as independent contractors (think insurance agents or real estate agents) deal with the public, because the public perceives the agent as a representative of the employer. Employers may attempt to characterize its expectations for the agents as “best practices” or “recommendations” rather than as requirements. However, if the employer in fact has the power to require its agents to follow what it labels as “best practices” or “recommendations”, the agents are likely employees of the employer.

Wisconsin law provides far more protection to employees rather than independent contractors. For example, employees may be entitled to overtime pay, cannot have wages deducted for errors without a written authorization or a finding that they are at fault for the error, and are entitled to all wages that the employers promised to them. A finding that someone is an employee rather than an independent contractor can thus entitle the person to substantial additional wages.

If you believe you are an employee, even though your employer has classified you as an independent contractor, you may contact the writer of this post, Yingtao Ho, at (414) 240-1185.