Have you analyzed whether your insurance agents are independent
contractors or employees? A federal appeals court recently
did, and its holding provides some valuable guidance.
Murray v. Principal Fin. Group, Case No. 09-16664
(9th Cir. 2010)
Patricia Murray sued Principal Financial Group, Inc. for sex
discrimination in violation of Title VII. Murray was a
"career agent," also known as an insurance agent.
The issue was whether Murray was an "employee" or an
independent contractor. If Murray was an employee, then she
is protected by Title VII.
When determining whether an individual is an independent
contractor, the court evaluates "the hiring party's right
to control the manner and means by which the product is
accomplished." The United States Supreme Court
identified the following factors in evaluating
"control":
[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] whether the
hiring party is in business; [11] the provision of employee
benefits; and [12] the tax treatment of the hired party.
Murray operated her business as she wanted on a day-to-day basis
without instruction from Principal. Murray sold products
other than Principal products. Murray decided when and where
she wanted to work. Murray even rented her own office
space. Murray scheduled her own time off and was not entitled
to vacation or sick days from Principal. Murray received
commissions only, and reported herself as self-employed to the
IRS. These factors contributed to the conclusion that Murray
was an independent contractor.
Although Murray received some benefits, had an at-will contract,
was subject to some minimum standards imposed by Principal, and had
a long-term relationship with Principal, these factors were
insufficient to make her an employee of Principal.
The government recently hired hundreds of new investigators to
review "independent contractor" classification. If
you engage independent contractors, you should conduct a compliance
audit to ensure that they are not, in fact,
"employees."
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
