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Judge Rules Insurance Co. Misclassified its Insurance Agents

Fri 15 Sep, 2017  /  by   /   Client Alerts

09/15/17 – Last month, a Federal district judge ruled that roughly 7,000 insurance agents were misclassified as independent contractors by an insurance company; they should have been classified as employees.

Law360 reports that District Judge Donald Nugent’s ruling followed a 12-day bench trial that focused on the sole issue of whether a group of insurance agents were employees under ERISA. The judge determined that the insurance agents were employees under the ERISA, because the company exerted a level of control over their work that was equivalent with that of typical employees.

Judge Nugent concluded that the insurance company, either directly or through its managers, retained some degree of control over its agents’ work. For example, if an agent did not follow the company’s policies or standards, most of its managers would issue reprimands, threats, and warnings of potential termination. Additionally, the insurance company’s managers had the authority to approve or deny agents’ vacations and, in certain instances, reprimanded agents for taking vacations or otherwise being absent from the office without approval.

The judge also noted that despite an agreement between the insurer and its agents claiming that the agents would be treated as independent contractors, the company’s internal documents showed that the insurer expected its sales managers to exercise control over agents’ methods and manner of performing their services.

The case is Walid Jammal v. American Family Insurance Co., number 1:13-cv-00437, in the U.S. District Court for the Northern District of Ohio.

Law360 (sub. req.).