A series of recent Massachusetts court rulings addressing the classification of workers as employees or independent contractors have involved real estate agents, truck drivers and taxi cab drivers. Employers can now add insurance agents to the list of workers who have undergone court scrutiny for classification as employees or independent contractors.
As many of you who follow the TJL bLAWg know by now, MGL Ch.149 §148B(a) sets forth a 3 prong test that employers must satisfy to classify workers as independent contractors:
(a) For the purpose of this chapter and chapter 151, an individual performing any service, except as authorized under this chapter, shall be considered to be an employee under those chapters unless:—
(1) the individual is free from control and direction in connection with the performance of the service, both under his contract for the performance of service and in fact; and
(2) the service is performed outside the usual course of the business of the employer; and,
(3) the individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.
In a recent case, Ruggiero v. American United Life Insurance Company, et al., the plaintiff “Ruggiero” claimed he was not free from the defendant, American United Life’s, (“AUL”) control because under his contract he was subject to their rules, regulations, policies and procedures. Ruggiero also claimed that AUL’s Chief Agency Officer’s office supervised Ruggiero and his performance. Additionally, Ruggiero claimed he sold AUL’s product and recruited and trained agents who also sold AUL’s products, and that he therefore engaged in AUL’s core business.
However, the court determined that the creation and administration of insurance products is ‘only incidentally dependent’ on the sale of them by general agents and that AUL is not in the business of directly selling insurance policies. (i.e. AUL is in the business of determining which products to make available, structuring and drafting insurance policies, obtaining regulatory approval for the insurance policies it makes available, and investing the policy premiums.) The Court also found that the record showed that the Chief Agency Officer merely checked on Ruggiero’s progress, offered resources for continued success, and performed some measure of ad hoc quality assurance for AUL. Finally, the Court found that Ruggiero merely pitched and compared AUL’s insurance products with AUL’s competitors to determine which policy was right for a particular customer.
As a result, the Court determined that “[A]n agent will not be considered an employee of a company simply because he makes sales that benefit the company. On these particular facts, it cannot be said that AUL was ‘directly dependent on the success of [Ruggiero’s] endeavors,’…Ruggiero’s sales services were ‘merely incidental’ to AUL’s business.”
And that is really the key takeaway here – that merely making sales that benefit a company, even where the company engages in some degree of ‘quality control’ will not necessarily mean the worker is an employee pursuant to MGL Ch.149 §148B.
If your company engages independent contractors to perform services or labor, or if your company has received a demand letter or complaint alleging violations of the Massachusetts Wage Act, you should contact a business litigation lawyer at The Jacobs Law LLC. You can reach us at 800-652-4783 or BUSINESS@THEJACOBSLAW.COM.