Misclassification lawsuits are among the most commonly litigated labor disputes. They involve the misclassification of individuals that more closely fit the definition of an employee than an independent contractor. While employees are entitled to certain benefits, including overtime, independent contractors have the freedom to set their own hours and take or leave jobs.
Sometimes, however, employers willfully misclassify employees as independent contractors, while simultaneously expecting them to report to work at a certain time and work for a set period of time. The IRS has established guidelines that differentiate between independent contractors and employees. The majority of states use this metric as the basis of making their own determination.
Recently, the question of whether insurance sales agents qualify as independent contractors or employees has been brought before the courts. Most recently a Texas federal court judge denied a motion to dismiss the class action brought on behalf of insurance sales agents who feel as though their job description does not fall in line with IRS guidelines.
Insurance Sales Agents Seek Compensation for Overtime
The case was brought against the Texas Farm Bureau Casualty Insurance Company (TFB) and a number of other insurance companies. The sales agents’ complaint details that they were misclassified on the basis of their job duties while lawyers for the TFB argued that the agents had voluntarily agreed to independent contractor contracts through a separate corporate entity.
The insurance companies also argued that under the FLSA (Fair Labor Standards Act) that the sales agents constituted independent contractors. They based this on a clause that mentions the “economic realities of the partnership.” The judge denied the motion to dismiss based on the belief that the plaintiff had provided sufficient facts to counter that claim. Those included an exclusive relationship that lasted over 12 years and agents who were closely supervised by TFB management.
Neither of those are relationships that are common to companies and their contractors. In fact, if an employer provides training to an individual, he or she is much more likely to be considered an employee than an independent contractor. Furthermore, independent contractors typically work for more than one company over a 12-year period.
Decision in Favor of Sales Agents Under Appeal
The case of Jammal v. American Family Insurance Company is currently being appealed after a decision in favor of the plaintiffs. Here, the question of whether the district court properly applied the Darden test for an independent contractor under ERISA is the grounds on which the appeal was filed. In the case that led to a verdict in favor of the sales agents, the plaintiff’s attorneys argued that the plaintiffs did not, in actuality, enjoy the rights that were afforded them in their contracts.
Part of the issue that faces insurance sales agents when filing these lawsuits is that they have been considered independent contractors for decades. Beating back that assumption requires plaintiff’s attorneys to look at how they are actually being treated by their employers.