This is an interesting case.
American Family Insurance Co. could face a legal liability as high as $1 billion if a federal judge adopts the ruling of a federal jury, which found this week that thousands of the insurer’s independent agents should be classified as employees who are entitled to a full package of retirement benefits.
Following a two-week trial, a jury in a U.S. District Court in Ohio on Tuesday returned a unanimous decision finding that Madison-based American Family improperly classified its agents as independent contractors, even though the agents are bound exclusively to sell policies from the company, often known as AmFam.
If a federal judge accepts the jury’s finding in a follow-up decision that is expected in June or July, AmFam could be forced to fund its retirement package in compliance with terms of the Employee Retirement Income Security Act (ERISA), which are federal regulations that protect retirement benefits.
“The jury apparently agreed that AmFam cannot have it both ways,” said Erin Dickinson, one of the attorneys representing the agents in the class-action suit. “A company cannot just call its agents ‘independent contractors’ to avoid following the federal law protecting retirement benefits and then insist on controlling how those agents do their work.”
I tend to agree with that attorney. How can one claim that they are “independent” contractors if they are prohibited from representing any other insurance provider? On the other hand, AmFam’s agents signed their contracts and entered the relationship with eyes wide open. Why should they get benefits that they weren’t expecting and that AmFam never promised?
I suppose the fairest solution is for the court to rule in favor of the agents, but only require AmFam to pay for their agents’ benefits moving forward.