Insurance Agent

Agents as employees? Tribunal breaks independent contractor's priority

Effective August 1, 2017, the U.S. District for the Northern District of Ohio ruled that insurance representatives operating under separate contracts with an insurance company are workers receiving pensions and other employee benefit under the Employee Retirement Income Security Act of 1974 (ERISA). Jammal v. American Family Insurance Group, which it has awarded certification for an interim remedy, is distinguished by the fact that it deviates from best practices in the insurance business and treats many insurance brokers as separate subcontractors.

Also noteworthy is that many of the elements that the tribunal found persuasive are common, reasonable and anticipated commercial practice for an insurance company that ensures that its representatives comply with minimal service levels under its name. Insurance companies and other employer will closely monitor the US CFA for the Sixth Circuit to see what guidelines this case provides for the ultimate assessment of supplier qualification.

Using the Sixth Circuit ERISA test for ERISA job placement level, the tribunal analysed the extent to which the insurance company has the right to monitor the way and means by which its representatives carry out their work, stressing that the exercise of this right is not necessary to consider a person as an employed person as distinct from an unrelated agent.

This test is based on the Supreme Court's ruling in Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 320-21 (1992), who used 11 non-exclusive elements from the Joint Law Agent Test on an ERISA entitlement of an insurance agent for retirement benefit. The Jammal ruling stated that the Sixth Circle had previously focused on explicit arrangements between the contracting entities and that the employer's capacity to monitor work and further employability were the most important determinants for reflection.

Meanwhile, in its analyses, the tribunal found that the following proofs speak for staff status: Insurance company "has always employed inexperienced and often non-licensed agent and conducted all necessary training" to act as agent. Our insurance company's distribution staff integrated and monitored the agents' day-to-day work intensively.

Distribution leaders establish targets and established agent blueprints and enforce adherence to targets and blueprints as their workplaces depend on agents' ability to sell insurance. As a result of the parties' agreements, this element was balanced in favour of staff employment since there is no limitation on the length of the placement and the insurance company described the job as a 'career position'.

Insurers could allocate extra responsibilities to agent personnel by asking them to enter into contracts for services they did not have with them, attend call calls, carry out individual insurance checks and draw up commercial blueprints, including when agent personnel attested that they could not withhold. It ruled that the insurance company demanded that the representatives comply with certain office times and reserved the right to monitor this part of the work by allowing the manager to come in and monitor adherence to the set times.

Submitting agent activities every day, even though they did not have to press a watch or otherwise capture their times. Proof was provided that the insurance company had reserved the right to grant or refuse leave applications and sometimes to reprimand representatives who were not in the offices without prior authorisation. "That' part of our normal business" factor:

Without the revenues produced by the agent, the insurance company could not operate as a company. The work of the agent was therefore part of the insurer's key role. Compared to this, the Tribunal found that the following facts were balanced in favour of independence of supplier status: According to the agreement between the agent and the insurance company, the contracting partners planned that the agent would be an unrelated agent.

Since the insurance firm monitored and delivered the'computers and softwares indispensable for the agent's activities', this element weighted only slightly in favour of the independence of the contract. They worked in their own offices and took over the cost of their construction sites. Given that the insurance provider retained a certain degree of oversight by banning the agent from working from home and the right to authorise the suggested site of an agent's bureau, this element only marginally favoured the independence of the contract.

Agent remuneration was on a commission basis and not on a fixed wage basis. "Providing services to employees" factor: They were not granted conventional social security and had to cover their own medical expenses. Neither party contested that the agent was taxed as an unrelated supplier. Having concluded that the Darden elements were "almost equally divided" between salaried staff level and freelance supplier level, the Tribunal found that the insurance company still had a certain right of review in almost all classes, although this right was not always used.

Taking into account the other elements considered most important by the Sixth Circle, the Tribunal found that the evidences in favour of salaried staff in three other areas were balanced. Firstly, the organisation had the right to monitor agents' output by permitting directors to rebuke or otherwise disciplin them if they did not meet their standard or apply their technique.

Secondly, the Tribunal also found that monitoring the agent's job possibilities is mandatory in the shape of a prohibition: 1 ) Owning a commercial register or a specific policy; 2) Selling insurance from another entity, even if the entity did not own the relevant insurance policy products; 3) competing with the entity for one year after terminating the policy; and 4) preventing active engagement in other activities during the policy period.

Third, the tribunal was convinced by documentary proof that the insurance company had educated its distribution directors to handle agent as employee by providing directors with a conventional agency oversight body that holds directors accountable for agent absences and by calling directors "employees" in course materials. Such participation does not necessarily mean that staff receive benefit under the insurer's various ERISA schemes; rather, entitlement depends on the particular conditions of those schemes, as well as any entitlement requirements that may be developed to expel persons classed as agent, regardless of any future legal recharacterisation.

ERISA is not the only company to apply the standard used by the courts in this case to conclude its agreement. Related testing has been carried out in relation to payroll tax, payroll and hours regulations and other labour related issues. At Jammal, the insurance company addressed some of these implications in a third application to de-certify the category of suing agent.

As an example, the firm reasoned that the evidences in the study on occupational health showed that some officers were satisfied with their handling, did not want to be considered as staff and some countered the possible effects of re-classification. Some representatives, for example, may be worried that they may have to resubmit declarations and repay deduction for self-employed and operating charges.

In spite of this circumstantial amount of proof, the Jammal Tribunal dismissed the company's argument that it was not founded on new elements supporting de-certification and relied on many of the same reasons given in its comments on employment conditions to reject the application for de-certification. Jammal, as the Tribunal stated in its observations, departs from a long-standing example in the ranking of contractors, especially where insurance intermediaries are involved.

It confirmed its finding on the remedy because of this abandonment of the case and the possible far-reaching effects of its finding. In this case, even if the Sixth Circuit finally annuls the Jammal judgment, the employer should carefully examine the facts in the context of its own agreements with contractors. The employer should also bear in minds that the state legal and corporate audits of supplier qualification are very different.

Employees should confer with the lawyer in order to carry out an appropriate and effective audit of supplier relations which includes changes in case practice, the particular circumstances of the employee and intensified disputes over the independence of the supplier. In ERISA cases, juries are generally not allowed to hear cases, so the Tribunal has set up an Advice Body under the Code of Civil Procedure 39(c)(1).

However, the jury's ruling was not final and the tribunal permitted the interested persons to present the factual statements and legal consequences suggested after the jury's ruling. Among these are: the qualification needed, the sources of the instruments and instruments, the place of work, the length of the relation between the contracting partners, whether the contracting partner has the right to allocate the person extra project, the scope of the person's judgment as to when and how long he or she should work, the type of remuneration, the person's part in the recruitment and remuneration of assistant workers, whether the work is part of the contracting partner's normal course of work, the supply of social security contributions and the person's fiscal status.