Thousands of insurance agents are employees, not independent contractors, a federal judge has ruled.

US District Court Judge Donald Nugent ruled in favor of a certified class of almost 7,000 insurance agents who claimed they were misclassified as independent contractors by American Family Insurance Co. The agents said they should be considered employees under the Employee Retirement Income Security Act. Nugent agreed, ruling that the company had a level of control over its agents’ work that was more in line with regular employees than contractors.

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According to his ruling, Nugent felt that American Family retained at least some control over its agents’ work. When an agent followed the company’s directives, that control wasn’t really enforced – but it was exercised – in the form of reprimands and even potential firing – when agents didn’t toe the company line.

“The ‘employer’s ability to control job performance and the employment opportunities of the aggrieved individual’ are the most important of the many factors to be considered,” Nugent wrote in his ruling.

“The degree of control managers were encouraged to exercise was inconsistent with independent contractor status and was more in line with the level of control a manager would be expected to exert over an employee. This, along with the evidence related to the other factors … supports a finding that the American Family agents defined in the class description should have been classified as employees and not independent contractors.”

Nugent did allow the insurer to file an appeal, admitting that the case was “unusually complicated” and that previous case law “has been nearly unanimous” in ruling that insurance agents are usually classified as independent contractors.


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