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United States : Judge grants immediate appellate review of ruling on classification of agents as independent contractors.

American Family Insurance is pleased with todays 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, 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.

Todays 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 jurys finding, he took the unusual step of granting immediate appeal of the courts 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, 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 join the company.

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 Familys 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.

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Publication:Mena Report
Date:Aug 2, 2017
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