This is huge news in Wisconsin.
A federal judge in Ohio has affirmed an advisory jury’s verdict that thousands of American Family Insurance agents are, in fact, employees of the Madison company and not independent contractors as the company defines their role — a ruling that could cost American Family as much as $1 billion in retirement benefits, attorneys for the plaintiffs say.
In a 44-page ruling on Tuesday in U.S. District Court in Cleveland, Judge Donald Nugent said American Family treats agents as employees by imposing such rules as not letting them sell insurance from other companies except those with financial ties to American Family; requiring agents to sign a one-year non-compete agreement when they leave; referring to agents as “employees” in training manuals; requiring agents to file daily reports; and giving managers authority over agents’ business plans and vacation times.
“American Family trained its managers to exercise control over the means and manner of agents’ sales and service duties when the company deemed it necessary, and reprimanded managers who did not exercise such control when the company deemed it beneficial to do so,” Judge Nugent wrote. That degree of control “was inconsistent with independent contractor status and was more in line with the level of control a manager would be expected to exert over an employee.”
Pensions are the least of AmFam’s problems here. If the ruling holds, the next question is “How much will IRS demand in OASDI, Medicare and FUCA taxes…..??”
Ugly, indeed.