Jammal v. American Family Insurance Company, 1:13-cv-00437

Background

Class action by current and former American Family insurance agents alleging they were misclassified as independent contractors and thus denied ERISA protections (filed 2013); class certified; issue bifurcated to determine employee status under ERISA.
Twelve-day bench trial with advisory jury; jury found plaintiffs were employees; court found jury verdict consistent with record and law.
Central factual findings: American Family recruited largely unlicensed/untrained agents, provided comprehensive training and branded tools, required use of company computers/software, set production/service expectations, maintained a layered manager structure that supervised and disciplined agents, and restricted agents’ ability to sell other insurers’ products or transfer/retain books of business.
Agents paid primarily by commission, bore many business expenses (office rent, staff wages, marketing), filed taxes as independent contractors, and were ineligible for many employee benefits though an ‘‘extended earnings’’ retirement-like plan existed.
Court applied the Darden multi-factor test (degree of control: manner and means) and found the factors nearly evenly split but concluded the employer’s retained right to control agents’ methods, the integral nature of agents to the company’s business, and evidence that managers were trained and expected to exercise control supported employee status for ERISA purposes.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether agents are "employees" under ERISA or independent contractors	Agents were functionally employees: company trained, controlled methods, managers supervised, restricted outside work, and controlled customer assignments	Agents were independent contractors: paid commissions, bore business costs, taxed as self-employed, had discretion in many day-to-day matters	Held: Agents are employees under ERISA (preponderance of evidence)
Importance of right-to-control (manner and means)	American Family retained and trained managers to control agents and would exercise control through reprimands/termination threats	Company asserted many directives were voluntary and not regularly enforced; control rights were limited on paper	Held: The retained right to control (even if not always exercised) supports employee status; managers were trained and expected to exert control
Weighting of Darden factors (skill, tools, location, duration, projects, hours, payment, hiring assistants, integral part, benefits, taxes)	Overall factors show employer control and integration with company business outweigh contractor indicia	Many Darden factors (payment method, tax treatment, agent investment) favor independent contractor status	Held: Darden factors nearly evenly split but key factors (integral work, duration, managerial control) tip balance to employee status
Whether interlocutory appeal should be allowed	N/A (court recognized significant legal ramifications and conflicting precedent)	N/A	Held: Court certified question for interlocutory appeal under 28 U.S.C. §1292(b) and stayed the case pending any appeal

Key Cases Cited

Darden v. Nationwide Mut. Ins. Co., 503 U.S. 318 (U.S. 1992) (articulates multi-factor test for determining "employee" status focusing on right to control manner and means)
Weary v. Cochran, 377 F.3d 522 (6th Cir. 2004) (applies Darden and recognizes express agreements are relevant but not dispositive)
Marie v. American Red Cross, 771 F.3d 344 (6th Cir. 2014) (employer’s ability to control job performance is a critical factor)
Keller v. Miri Microsystems LLC, 781 F.3d 799 (6th Cir. 2015) (consider company’s investment versus worker’s investment in tools when weighing control)
Peno Trucking, Inc. v. C.I.R., [citation="296 F. App'x 449"] (6th Cir. 2008) (right to control, not its exercise, is decisive)
N.L.R.B. v. Cement Transp., Inc., 490 F.2d 1024 (6th Cir. 1974) (same principle regarding retained right to control)
Simpson v. Ernst & Young, 100 F.3d 436 (6th Cir. 1997) (control over job performance central to classification)
Ware v. United States, 67 F.3d 574 (6th Cir. 1995) (Darden factors non-exhaustive; weigh incidents of relationship)
Wolcott v. Nationwide Mut. Ins. Co., 884 F.2d 245 (6th Cir. 1989) (provision of employee benefits supports employee status)
Worth v. Tyer, 276 F.3d 249 (7th Cir. 2001) (substantial training and supervision favors employee status)