In 2000, Allstate Insurance converted the majority of its sales force from employee to independent contractor status. With the change in status, many of those agents anticipated liberation from the requirements of being an Allstate employee. Nine years later, those 12,000+ Allstate agents are still waiting for their independence. Having grown weary waiting for Allstate to right the situation, they’ve taken their case to the IRS in the form of a petition drive.
The petition, written by an unidentified agent and published nationally by National Association of Professional Allstate Agents (NAPAA), a non-profit representing the rights of Allstate agents, cites a Private Letter Ruling issued by the IRS in 1989. NAPAA contends this letter gave Allstate tax-advantaged status by promising the IRS that the agents would become true independent contractors and be treated as such. It’s an agreement the agents contend Allstate has far from lived up to its end of the bargain.
“It’s a situation where Allstate gets to have its cake and eat it, too,” said Jim Fish, NAPAA executive director. “Agents bear all of the expenses and risks associated with operating an independent business, but are controlled as employees. Meanwhile Allstate enjoys a huge competitive cost advantage by avoiding expenses associated with pensions, health insurance, 401k’s, Social Security and, most importantly, federal taxes. You would think that alone would rate the IRS’s attention, but that’s not been the case.”
Added Fish, “Now that the IRS has announced plans to audit 6,000 companies for employment tax issues, maybe Allstate agents will finally attain the independent contractor status they have long been denied.”
Some of the restrictions Allstate agents have found as “independent contractors” include:
· Mandatory office hours.
· Sales quotas.
· Verbal and written warnings threatening loss of contract for not meeting company quotas.
· A requirement to forward office telephone calls to company service centers after hours.
· Subjection to a number of employee-like controls, including annual performance reviews.
· Mandatory meetings and training sessions.
· Submission of oral or written production reports.
· Risk of termination at-will.
In fact, many agents feel they’re treated more like employees today than when they were actual employees. Said one agent, “Back then, we had a pension plan and, if the company wanted to fire you, there was an agent review board in place. Now, they can fire you with or without reason.”
Allstate agents certainly aren’t the first independent contractors to be treated like employees without the accompanying benefits. In 2007, after filing a class action lawsuit demanding parity with employee drivers, current and former FedEx independent contractor drivers were elated when Judge Robert Miller of the U.S. District Court in Northern Indiana certified them as a class. This action has opened the door to similar cases involving independent contractors who are treated like employees.
So why hasn’t the IRS gone after Allstate?
“That’s a good question and one we hope this petition gets the IRS and the Obama administration to answer. Especially since this situation has such a dramatic impact on an agent’s book of business,” said Fish.
The long-term goal for most insurance agents is to build their book of business and then, when they retire, sell it to the highest bidder. At Allstate, this is not always possible because the company controls who buys these books of business. Said one agent, “Our books of business were supposed to replace our pensions, but [Allstate] managers have started to interfere in the sales process, which has lowered the value of our agencies. This isn’t fair because for many of us, our book of business is the most important retirement asset we have.”
For more information on the National Association of Professional Allstate Agents, you can visit their Web site at www.napaausa.org or call (877) 269-3474.
About National Association of Professional Allstate Agents (NAPAA)
Based in Gulfport, Mississippi, NAPAA is a non-profit organization whose members are predominantly insurance agents under contract with Allstate. In addition to offering a variety of benefits and services, NAPAA further serves its members by acting on their behalf and speaking with a distinct and unfettered voice on a wide range of issues. To contact NAPAA, please visit its Website at www.napaausa.org or call (877) 269-3474.