Court of Appeal Finds "At Will" Insurance Agent Was Independent Contractor

Happy New Year!

Kimbly Arnold was an agent working for Mutual of Omaha.  She was non-exclusive, and sold other lines as well.  She was "at will" but was paid solely on commissions, had no office space unless she paid for it, had no supervisor or other personnel "managing her."  Her only job requirement was to submit at least one application for insurance every six months. 
Arnold took a job with another company requiring an exclusive relationship. She then brought a class action alleging failure to reimburse expenses under Labor Code Section 2802, and failure to pay wages at the time of termination.  Both of these claims require an "employment" relationship. 
Agreeing with the trial court, the Court of Appeal held that Arnold was an independent contractor, based in part on this evidence:
Mutual managers make themselves available to assist agents, as distinguished from supervising them. Training is generally not mandatory and is offered chiefly for the guidance of "new" agents. Training is required only with respect to compliance with state law directives. Managers provide assistance with sales or clients when an agent "wants them to assist." Software is provided by Mutual as a "best practice[e]" to enable agents to sell its products more successfully. Conference rooms, if available, are provided as a courtesy to agents seeking to set up a meeting and have no other space in the office. Mutual policy does not otherwise reimburse agents for regular business expenses, such as entertaining a client, although it does provide certain "prospecting" credits, beginning when an agent is newly appointed, by which the agent might apply for reimbursement for mailings, newsletters, and similar expenses to generate new business for Mutual products. The credits must be used and have no separate compensatory value. While Mutual pays its agents in two-week periods, payments are comprised of commissions and bonuses established by policy, and there is no guaranteed compensation; advances may be authorized only by a general manager in the event an agent has submitted an application for which a policy is likely to be issued. Advances are rare, due to the policy to pay commissions only on business actually issued, as opposed to routine advances for the purpose of regularizing payment amounts. . . ..

Arnold used her own judgment in determining whom she would solicit for applications for Mutual‟s products, the time, place, and manner in which she would solicit, and the amount of time she spent soliciting for Mutual‟s products. Her appointment with Mutual was nonexclusive, and she in fact solicited for other insurance companies during her appointment with Mutual. Her assistant general manager at Mutual‟s Concord office did not evaluate her performance and did not monitor or supervise her work. Training offered by Mutual was voluntary for agents, except as required for compliance with state law. Agents who chose to use the Concord office were required to pay a fee for their workspace and telephone service. Arnold‟s minimal performance requirement to avoid automatic termination of her appointment was to submit one application for Mutual‟s products within each 180-day period. Thus, under the principal test for employment under common law principles, Mutual had no significant right to control the manner and means by which Arnold accomplished the results of the services she performed as one of Mutual‟s soliciting agents.
The additional factors of the common law test also weigh in favor of finding an independent contractor relationship. Although Mutual could terminate the appointment at will, a termination at-will clause for both parties may properly be included in an independent contractor agreement, and is not by itself a basis for changing that relationship to one of an employee.
Notably, Arnold was engaged in a distinct occupation requiring a license from the Department of Insurance, and was responsible for her own instrumentalities or tools with the exception of limited resources offered by Mutual to enhance their agents‟ successful solicitation of Mutual‟s products. Arnold was required to pay a fee for the use of Mutual‟s office space and telephone service. Although Mutual paid its agents in a systematic way every two weeks, Arnold‟s payment itself—chiefly commissions—was based on her results and not the amount of time she spent working on Mutual‟s behalf. Finally, both Arnold and Mutual believed, at the time of her appointment, they were creating an independent contractor relationship and not an employee relationship.

Thus, the court went through the typical analysis of an independent contractor relationship under California's "common law" test and came up with little evidence of an employer-employee relationship.  The court rejected Arnold's attempt to define employee more broadly by using a Labor Code Section that contains no definition of employee... (Lab. Code 2750).

Anyway, the case is Arnold v. Mutual of Omaha Ins. Co. and the opinion is here.