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Overtime Pay: Am I An Independent Contractor?

On Behalf of | Feb 21, 2020 | Employment Discrimination, Race Discrimination |

Overtime Pay: Am I An Independent Contractor?

Best Ohio Overtime Pay Attorney Answer: What qualifies someone as an independent contractor? What benefits must my employer give me as an independent contractor? Can I be considered an employee even if I signed a contract that says I’m an independent contractor? How do I find the top wage theft lawyer? Is it better to be independent contractor or employee? Overtime Pay: Am I An Independent Contractor?

Sometimes, the courts get theanswer wrong. Our wage and hour attorneys are constantly looking for new developments in the law on misclassification of employees. This is a really important issue because under the Fair Labor Standards Act (“FLSA”), an employee has to be paid minimum wage and must be paid time and a half for overtime hours worked in excess of forty hours per week. (Can Hourly Employees Be Exempt From Overtime?; My Boss Calls Me An Independent Contractor, Am I?; What Can We Do If Our Job Doesn’t Pay Anyone Overtime? I Need The Best Wage Theft Lawyer In Ohio!).

You may be shocked to hear this, but your boss, manager or the owner of the company maybe lying to you in order to make more profit for the business. Often, an employer will simply tell an employee that he or she is an independent contractor or manager that is exempt from overtime. Sometimes, a boss will tell you that because you are paid a salary, you are not entitled to be paid anything for hours worked over 40 hours per week. But, these are not the real tests. Labels do not count. Court will look to what workers actually do – the work they perform – as well as many other factors to decide if a worker is an employee or independent contract; a manager or a rank and file employee; exempt or non-exempt employee. Sometimes, these determinations are easy. Sometimes, not so much.

New case law, whether it helps employment attorneys or not, is vital because it changes our strategies and how we approach our next fight (that’s a link how we fight every case and never take no) A recent case Jammal v. America Family Insurance Co, brought some bad news for employment lawyers and wrongfully classified independent contractors. The concept of justice can be elusive in practice. Occasionally, the courts get it wrong. Judges and Magistrates are some of the most learned individuals in the justice system, however, they are still human. They still make mistakes. The Jammal case is a shining example of how a district court judge got it right, and the appeals court got it wrong.

American Family Insurance Company is a household name. But lately, the company has been in the news for different reasons. Frequent employment law blog readers are familiar with the various factors courts use to consider whether an employee is an independent contractor or an employee entitled to various benefits (See: My Boss Calls Me An Independent Contractor, Am I?; Are All Professionals Exempt From Overtime Pay? I Need A Lawyer!Should I Be Paid Overtime Even If I Have The Title Manger? Top Ohio Wage and Hour Lawyer ReplyTop Wage and Hour Lawyer Reply: As A Salaried Employee, Am I Exempt From Overtime Pay? ).

American Family Insurance agents realized that they may be misclassified as “independent contractors” and fought for the classification of “employee.” It’s not uncommon for independent contractors to be incorrectly labeled so that their employer can save money. This example shows that even huge companies like American Family Insurance, take advantage of the difference in classification at the expense of those who work for them.

American Family Insurance Company admits that their insurance agents are “at the core to the business.” According to court documents over the last five years, American Family’s insurance agents have brought in 85 percent of American Family’s insurance premiums that’s approximately $5.1 BILLION. Despite this, American Family Insurance from denied its agents from enjoying numerous health, welfare, and retirement benefits.This means that American Family insurance agents did not get a retirement plan, 401k plan, group health plan, group dental plan, or long-term disability plan through their work, which seems quite ludicrous considering how much money the company brings in every year. It’s even more outrageous once you consider the nature of the insurance agents, and how much they do for the company, and yet they are still denied these basic benefits.

The original plaintiff, Walid Jammal, and Dana LaRiche filed the proposed class action lawsuit on February 28, 2013 in the Northern District of Ohio. The plaintiffs wanted to be reclassified as employees so that they could receive benefits and retirement plans. Some 7,200 current and former American Family insurance agents came together to file this class action lawsuit. American Family argued that it was not and is not required to provide these benefits because it classifies its insurance agents as independent contractors, not employees.

Overtime Pay: Am I An Independent Contractor?

The District Court discussed the importance of looking at the degree to which the hiring party retains the right to control the manner and means by which the service is accomplished. And stressed that the Sixth Circuit Court of Appeals has consistently held that a worker can be classified as an “employee” if the employer retains the right to direct or control the manner and means of work. It does not matter if the employer exercises this right, it only matters if the employer reserves that right. This is important because the district court reiterated that while contracts are important, they are not the end-all-be-all. Other factors must be considered to prevent misclassification of employees.

What are the factors to determine if I am an independent contractor? There are several factors that must be weighed when determining whether someone is an employee or independent contractor. Those factors include: (1) the skill required; (2) the source of the instrumentalities and tools; (3) the location of the work; (4) the duration of the relationship between the parties; (5)whether the hiring party has the right to assign additional projects to the hired party; (6) the extent of the hired party’s discretion over when and how long to work; (7) the method of payment; (8) the hired party’s role in hiring and paying assistants; (9) whether the work is part of the regular business of the hiring party; (10) the provision of employee benefits; and (11) the tax treatment of the hired party. The district court carefully considered each of these factors, and correctly concluded that more factors weighed in favor that American Family insurance agents should be labeled as employees and not independent contractors.

Moving through each of these factors, the Court noted that American Family does not require any specialized knowledge or expertise to be hired as an American Family agent. However, it was noted at trial, that American Family prefers to hire agents with no prior experience, so they can be trained in the “American Family way.” After the employee is hired, American Family agents are required by the company to obtain and maintain a license “in accordance with the laws of the state in which they reside,” at their own expense.

All agents are paid to attend a mandatory two to three month long “comprehensive training program” on how to sell and how to operate an agency. There is no limit on the duration of the agency relationship. American Family described the agency position as a “career” position. Additionally, American Family offers and “extended earnings” benefit plan based on years of service and performance that was described to the agents as a retirement plan. The plaintiffs filed their taxes as if they were independent contractors, and they deducted business expenses as self-employed business owners. So far, the factors were pretty much split as to whether the agents should be employees or independent contractors.

The factor that tipped the scale in favor of employee status at the trial court level was that American Family retains “total control over where policies go and to what agent.” The company retains the right to transfer customers to other agents at its own discretion, at any time. Even though American Family Insurance markets the position as “owning your own insurance agency” American Family agents cannot sell their agency. The agents cannot assign any rights to the income of their agency to anyone else, and they cannot sell competitive insurance products. Agents must work exclusively for American Family. American Family discourages additional employment by agents even if it is unrelated to the insurance industry and has threatened to terminate agents in order to persuade them to leave a second job. American Family agents must work out of an agency office and may not work from home.

But that’s not the only way that American Family Insurance maintains control over their insurance agents. American Family is heavily involved in the office selection process. They reserve the right to veto where agents can establish an office. American family also monitors agents’ emails and computer usage. At trial, there was testimony that explained how uncommon this practice is. Other insurance agencies do not retain the right to access their independent agents’ computer or monitor agents’ emails.

Ultimately, the District Court concluded that American family agents should be classified as employees and not independent contractors. THIS IS HUGE. The district court determined that the even though the factors were “almost evenly split between favoring employee status and favoring independent contractor status,” the court determined that they were employees because of the degree of control that managers maintained over the insurance agents. The District Court got it right, and basically said, if it walks like a duck, and talks like a duck, it’s a duck. There haven been many cases before this one where district courts have shut down the argument that insurance agents are employees and not independent contractors. This decision from 2017 was a huge victory for employment law attorneys and wrongfully named independent contractors.

Predictably, American Family Insurance filed an appeal to get the classification overturned. Of course, American Family Insurance did not want this classification to stick. That would mean they would have to start giving their insurance agents benefits and treating them like the real employees they were. On appeal, the United States Court of Appeals for the Sixth Circuit disagreed with the lower court and reversed. The district court held that the “amount of skill” factor weighs slightly in favor of employee status, however, the Sixth Circuit held that this factor weighs in favor of independent contractor status because “the sale of insurance is a highly specialized field that requires considerable training, education, and skill.” Coming to a different conclusion on this one factor was enough to tip the scale in the other direction. The Sixth Circuit held that American Family Insurance agents were, indeed, independent contractors and not employees.

This means that American Family Insurance agents will not get the benefits they deserve. It’s unfathomable that American Family Insurance company gets to retain this much control over their “independent contractors” and yet not give them the benefits of employee status. It just goes to show what lengths some companies will go to make a quick buck. In employment law, we cannot always predict how the laws will evolve or anticipate a court’s every move. However, our attorneys live to fight for progress, and assert the rights of employees against employers. Hopefully, in the future, another case like this one will come about so that this issue can be rehashed.

If you believe that your employer is not paying you all of your wages for all of your lawfully earned overtime compensation at a rate of one and half times your normal wages as requires under the Federal Fair Labor Standards Act or Ohio Minimum Fair Wage Standards laws or you are an nonexempt employee that has been misclassified as exempt or independent contractor, contact the attorneys at Spitz, The Employee’s Law Firm today for a free and confidential initial consultation. The wage and hour lawyers at Spitz, The Employee’s Law Firm will provide you with the best options for your overtime pay dispute situation. If you even think that you may be entitled to overtime pay that you are not being paid, Call our office at 866-797-6040 right now. Do not wait.The longer that you wait, the less that your claim may be worth.

Overtime Pay: Am I An Independent Contractor?


The materials available at the top of this overtime, wage and hour web page and at this employment law website are for informational purposes only and not for the purpose of providing legal advice. If you are still asking, “Am I entitled to overtime?”, “Does my job have to pay me extra when I work over 40 hours per week”, “My paycheck is not right” or “What do I do if my company will not pay overtime”, the your best option is to contact an Ohio overtime attorney to obtain advice with respect to FLSA questions or any particular employment law issue. Use and access to this employment law website or any of the links contained within the site do not create an attorney-client relationship. The legal opinions expressed at the top of this page or through this site are the opinions of the individual lawyer and may not reflect the opinions of Spitz, The Employee’s Law Firm, Brian Spitz, or any individual attorney.