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Jammal v. American Family Decision Overturned by Court of Appeals (January 2019)


NASFA has closely followed the Jammal v. American Family misclassification case since 2013. The initial Federal trial court decision in Ohio is available to members here (Members Only). All captive agents have taken an interest in the case because the treatment of American Family agents is substantially similar to the treatment of other captive agents. The purpose of the suit was to declare the agents to actually be employees as defined by ERISA, the Employment Income Security Retirement Act. A judicial reclassification of agents would then entitle them to all of the fringe benefits offered to other Company employees, most notably pension and health insurance benefits, among others.

The August 2017 decision at the trial court level had been favorable to the agents, finding that they did meet the Darden Test in detail and had not been treated properly by American Family. In arriving at this decision the court went into great detail, describing how American Family's detailed oversight of the day to day operations of an Agency created an employer-employee relationship rather than a principal-agent relationship.

On appeal, the Sixth Circuit of the United States Court of Appeals found that the trial court, despite its opportunity to see and hear the witnesses, had misapplied the law, and that the agents were not employees for purposes of ERISA. That January 29, 2019 decision is now available for you to read here (Members Only).

The case is important to State Farm agent's because of the similarity of treatment by the Insurance Company of its agents. As NASFA has previously analyzed, there is a substantial similarity in how involved the Company is in its oversight, or interference with, the day to day operations of a State Farm agency.

The case has presented an interesting issue for NASFA. NASFA firmly believes in the Principal-Agent method of doing business, and holds to that principle as one of its basic tenets. NASFA wants agents to be independent contractors for all purposes as promised by the Agents Agreement. What NASFA does not want is interference by the Company in that Independence. Reading the opinion in Jammal and its description of what being an "employee" involves strengthens NASFA's resolve to preserve that relationship. We believe in Independent Contractor Insurance Agents, just like it was promised when you signed your contract. We firmly believe that State Farm regularly oversteps its boundaries as it dictates to agents.

Login to read what Robert O'Connor has to say about this decision.