U.S. appellate court rules American Family Insurance agents are independent contractors
The U.S. Court of Appeals for the Sixth Circuit today ruled that American Family Insurance agents are independent contractors, reversing a lower court ruling that the company’s agents should be classified as employees.
The U.S. Court of Appeals for the Sixth Circuit today ruled that American Family Insurance agents are independent contractors, reversing a lower court ruling that the company’s relationship with its agents warranted they be classified as employees. A three-judge panel ruled 2-1 to overturn the verdict.
“We are pleased the court – like other courts before it – recognized our agents for who they are, independent business owners who decide how to run their agencies and serve their customers,” said American Family Insurance Chief Strategy Officer Dave Holman.
“We are grateful and proud of the positive, collaborative relationships we have with our agents. They are trusted advisers to customers, and trusted partners with our company,” Holman said. “And, we will continue to support them and celebrate their success.”
Background on American Family Insurance class action lawsuit
Today’s ruling stems from a 2013 federal class action (Jammal et al. v. American Family Insurance Company, et al.) that alleged American Family agents should have been classified as employees due to the level of control exercised by the company, entitling them to certain protections under the Employee Retirement Income Security Act (ERISA).
The case was filed in an Ohio U.S. District Court by four former American Family agents. In March 2016, the federal court made a procedural decision to certify the case as a class action. The decision added approximately 7,000 current and former agents as plaintiffs and precluded them from withdrawing from the case.
In August 2017, U.S. District Court Judge Donald Nugent issued a ruling in the liability phase of the case, supporting plaintiffs’ claims that members of the class should have been classified as employees.
In making his ruling, however, Judge Nugent granted an immediate appeal of his decision to the Sixth Circuit U.S. Court of Appeals. In fast-tracking the appeal, he stated there was evidence supporting both sides in the case and acknowledged past court decisions had been nearly unanimous in ruling that insurance agents are properly classified as independent contractors.
In October of 2017, the Court of Appeals agreed to hear the case. Attorneys for both sides presented written and oral arguments before today’s ruling.
"How we work with our agents is customary in the insurance industry and of company-independent contractor relationships across the country. They are paid by commission, hire and pay their staff, set their work hours, and create and execute plans to run their businesses. They file taxes as independent contractors with the Internal Revenue Service and take tax deductions for their business expenses,” Holman said.
“Today’s ruling is now the sixth time a federal court has confirmed our agents are properly classified as independent contractors.”
About American Family Insurance
Madison, Wisconsin-based American Family Insurance group is the nation's 13th-largest property/casualty insurance group and ranks No. 311 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 and Homesite) also provide options for consumers who want to manage their insurance matters directly over the internet or by phone. Affiliate Main Street America sells insurance products through independent agents. Web www.amfam.com; Facebook www.facebook.com/amfam; Twitter www.twitter.com/amfam.