Madison,
01
August
2017
|
09:21 PM
America/Chicago

Judge grants immediate appellate review of ruling on classification of agents as independent contractors

Judge cites multiple past cases affirming the classification as proper

Summary

Ohio court rules on American Family Insurance agent classification case.

American Family Insurance is pleased with today’s ruling in an Ohio federal class-action lawsuit in which the judge granted immediate appellate review of the decision that American Family agents were misclassified as independent contractors. He also granted immediate appellate review of the previous decision to certify the case as a class action.

“American Family agents operate with tremendous independence that justifies classification as independent contractors. The classification has been previously affirmed by five federal court decisions and the Internal Revenue Service. We are confident we will prevail in this situation as well, affirming the strong relationships and model we have with our agents,” said American Family Chief Legal Officer Mark Afable.

U.S. District Judge Donald Nugent (Northern District of Ohio, Cleveland) issued the ruling in the liability phase of a lawsuit (Jammal et al. v. American Family Insurance Company, et al.) originally filed in 2013 by four former American Family agents. The four former agents alleged they were misclassified as independent contractors instead of as employees due to control exercised by the company, thereby entitling them to employee benefits under federal law.

In March 2016, the judge made a procedural decision to certify the suit as a class action, automatically adding approximately 7,000 former and current American Family agents as unnamed plaintiffs.

Today’s ruling by Judge Nugent follows a 12-day trial in April, which concluded with an advisory jury finding in favor of the plaintiffs. While the judge agreed with the jury’s finding, he took the unusual step of granting immediate appeal of the court’s ruling to the 6th U.S. Circuit Court of Appeals, and staying any further proceedings in this case pending that review. In taking this step, Judge Nugent cited past cases that ruled agents were properly classified as independent contractors:

“The Court finds, pursuant to 28 U.S.C. §1292(b), that an interlocutory appeal may materially advance the ultimate termination of the litigation because: (1) there was evidence supporting both sides in this case; (2) prior case law has been nearly unanimous in finding that insurance agents generally are to be classified as independent contractors; (3) the repercussions of this finding are so far-reaching; and, (4) the resolution of damages will be unusually complicated.”

“An appeal was anticipated in this case, regardless of outcome. We are pleased the judge made that decision on his own, and we will pursue that appeal.” said Afable.

American Family agents are solely responsible for the manner and means by which they sell insurance and run their agencies. They set their office hours; select, pay and determine responsibilities for their staff; and create and execute their own business plans. They declare themselves as self-employed independent contractors with the IRS and take tax deductions for their business expenses.

In the process, they are paid through commission sales, with additional compensation after they leave the company based on years of service and performance. American Family agents must satisfy certain requirements, and those requirements are clearly stated in the contracts they voluntarily sign when they start as agents.

Plaintiffs’ attorneys have floated an exaggerated estimate on a potential court judgment. “The estimate is grossly overstated and premature considering the case is still being resolved,” Afable said. “American Family is financially strong and well prepared for the possibility of a court judgment.”

“At the end of the day, taking care of our customers and fulfilling our promises to them when they need us most is what American Family is all about,” said Gerry Benusa, American Family’s chief sales officer and former agent in Arcadia, Wisconsin. “We believe we do that best through our agents as independent contractors, while continuing to explore, innovate and adapt to meet customer preferences into the future.”

###

About American Family Insurance
Madison, Wisconsin-based American Family Insurance is the nation's thirteenth-largest property/casualty insurance group and ranks No. 315 on the Fortune 500 list. The company sells American Family-brand products, including auto, homeowners, life, business and farm/ranch insurance, primarily through its exclusive agents in 19 states. American Family affiliates (The General, Homesite and AssureStart) also provide options for consumers who want to manage their insurance matters directly over the Internet or by phone. Web www.amfam.com; Facebook www.facebook.com/amfam; Twitter www.twitter.com/amfam