Allstate Agents Dealt Legal Setback in Employment Status Case

May 29, 2008 ( - A nearly seven-year legal fight between Allstate Insurance Co. and its agents over their employment status has concluded with a ruling that a program making them independent contractors did not illegally deprive them of benefits.

Senior Judge James B. Moran of   the U.S. District Court for the Northern District of Illinois decided the insurance company did not violate theEmployee Retirement Income Security Act (ERISA) when, in the late 1990s,   it switched the agents from an “employee-agent” status to that of an independent contactor. The agents were permitted to operate their own small businesses.

With that ruling, Moran threw out the agents’ claim that the switch in their employment status amounted to a constructive discharge that illegally interfered with their receiving of ERISA-protected benefits.Moran contended in the ruling that the insurance company had a legitimate reason to make the change: market research indicated that customers preferred to deal with agents who were available for longer hours including in the evening and on Saturday.

Moran ruled that even if the change resulted in agents leaving the company, that was not sufficient to prove Allstate’s intent to deprive them of protected benefit programs.   The court asserted that the agents could not use as proof a case where an agent was disciplined for not operating an Allstate office during the company-specified hours.

A group of agents kicked off the legal battle against the employment status change in March 2001 by filing the ERISA suit.

The ruling in   Flanagan v. Allstate Insurance Co.,N.D. Ill., No. 01 C 1541, 5/23/08 is here .