U.S. Appeals Court Takes Up American Family Agent/Employee Classification Case


A federal appeals court in Ohio on July 31 heard arguments by opposing attorneys in a class action involving whether agents working for an insurance carrier on an exclusive basis should be classified as independent contractors or as company employees.

The 6th U.S Court of Appeals in Cincinnati has agreed to consider an appeal of the district court’s interlocutory opinion in Walid Jammal, et al. v. American Family Ins Co, et al., finding that the plaintiff insurance agents are American Family Insurance Group employees as opposed to independent contractors.
Following a 12-day trial in April 2017, a federal advisory jury in United States District Court for the Northern District of Ohio concluded that Madison, Wisconsin-based American Family Insurance Group had misclassified thousands of sales agents as independent contractors.

In July 2017, Judge Donald Nugent affirmed that finding. He wrote in his order that the presented evidence “supports a finding that the American Family agents defined in the class description should have been classified as employees and not independent contractors.”
However, Nugent has given the parties the authority to make an appeal of controversy and remains in the waiting list for the appeal.

He wrote that such an appeal was “pecuniary” as the final destruction of the cases: (1) there was evidence supporting both sides in this case; (2) the previous case law was found almost unanimously to find that insurance agents were generally classified as independent contractors; (3) the reflections of this find are very broad; and (4) the decision on compensation will become unusually complex. ”

The case was first brought by four former American family agents, and its end result would affect retirement benefits for approximately 7,000 former and former agents. Class-action plaintiffs claimed that the American Family’s 1974 Working Retirement Income Security Act (ERISA) refused to classify the federal laws protecting retirement rights as improperly structured representatives when they were employees.

The arguments in front of the federal district court focused on the level of control the company has made on sales agents.
Judge Nugent wrote: “In order to determine the status of employment under ERISA, the courts are asked to look at the extent to which the recruited party has the right to control the procedures and means in which the service is performed.”

The agency agreement with the company states that agents are independent contractors who are obliged to pay taxes and have the right to an independent tribunal on how they conduct their business. As independent contractors, the intermediaries are not eligible for workers’ compensation and unemployment benefit.

However, when the plaintiffs see the company on paper as an independent contractor, company executives are sometimes guilty of ways and means of conducting coercion. Representatives are obliged to purchase the goods necessary to operate their agents, but they are not allowed to sell the agency if they decide to terminate their relationship with the American Family.

The American family claimed that managers work with intermediaries solely on the basis of how their representatives have reached themselves, not on the sales targets and on the outcomes of these goals.

Judge Nugent wrote that instead of a retirement plan for American family workers, “the representatives were offered a” gained ear “for years of service. “This plan offered a lifetime salary raise and was defined as a retirement plan for agents.” And with the application made by state insurance regulators, the American Family described the extended earnings plan as a “defined benefit.”

After an agent left the company, he kept what he would have earned over the past six months, the number of years he worked and the agent’s “special relationship” with the American family.

6. The question asked by the circuit panel on July 31 stated that judges will look again at the level of control over the company’s agency activity. Judges also questioned how an agent would be accepted as an employee when it comes to retirement pensions, or how an independent contractor was questioned for tax purposes. The extensive impact of the case, if any, was a subject that the judges wanted to investigate.

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