ERISA [the Employee Retirement Income Security Act, which governs most private-sector pension plans] seeks to protect employees' interests in their employer-provided pension benefits. Therefore, in order to recover pension benefits under an ERISA-governed plan, one must be an employee of the sponsoring employer. The same holds true if you work for a governmental employer; that is, you must be an employee of the governmental entity.
Disputes sometimes arise when parties disagree as to whether a worker is an employee or, instead, an independent contractor. A recent case illustrates how the problem might arise, and the factors courts consider in deciding the question, at least where the claim is for ERISA plan benefits. Jammal v. Am. Family Ins. Group, No. 1:13-cv-437. 2017 U.S. Dist. LEXIS 120684 (N.D. Ohio, Aug. 1, 2017).
In Jammal, plaintiffs who were insurance agents for American Family Insurance Company (American) brought a class action against American under ERISA seeking benefits under its ERISA-governed pension and welfare plans. A threshold question was whether plaintiffs were employees under ERISA or, instead, independent contractors. If they were independent contractors, the court would dismiss their ERISA claims.
In pursuit of the answer to this question, the court conducted a twelve-day trial before an "advisory" jury, which concluded that the agents were employees under ERISA, not independent contractors. While not bound by this finding, as the jurors served on only an "advisory" basis, the court found that the jurors' conclusion comported with the weight of the evidence.
The court explained that, in determining employment status under ERISA, courts must consider the degree to which the hiring party retained the right to control the manner and means by which the individual's services were accomplished. The court found that, although the agents signed an agreement with American, which expressly stated that they were independent contractors, American's internal documents and actual practices indicated that American exercised control over the agents' method and manner of performing their services.
For example, American required agents to provide sales reports, visit homes, participate in call nights, do cold calling, conduct personal insurance reviews, prepare business plans, service policies without compensation, and fill out daily activity and other reports. Agents were also required to keep their offices open during regular business hours and to work specific times and places for periodic campaign drives, mandatory meetings, and call nights. American had the authority to approve or deny agent vacations and, in some instances, reprimanded agents who took time off without company approval. And American's training manual explicitly referred to the agents as "employees." Given this and other evidence of American's control over the method and manner in which the agents provided their services, the court held that the agents were, in fact, ERISA employees, not independent contractors.
While the court ruled in favor of the agents on the threshold question of whether they were employees, the litigation is far from being over. Indeed, immediately following this ruling, the court (i) certified the question for "interlocutory appeal" to the Sixth Circuit Court of Appeals; and (ii) put a hold on all other proceedings in the case pending a ruling from the Sixth Circuit as to whether the court had correctly ruled. It will likely be at least a year before the Sixth Circuit issues a decision on the question. I will publish a follow-up post at that time.
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