California Appellate Court Issues A Decision That Mutual Of Omaha Insurance Agents Qualify As Independent Contractors As A Matter Of Law

On December 31, 2011, as a final act for the year, the First Appellate District of the California Court of Appeal issued a good appellate decision for employers on the issue of independent contractor status, Arnold v. Mutual of Omaha. The case creates a veritable roadmap for insurance companies on how to treat agents so that they maintain their status as independent contractors rather than employees.

The Key Facts

Ms. Arnold worked as a non-exclusive insurance agent for Mutual of Omaha, which meant she was authorized to sell their products but was free to (and did) sell products of other insurance companies. Nonetheless, she claimed she was actually an employee rather than an independent contractor (IC), and that she therefore was entitled to recover for reimbursement of expenses and waiting time penalties for unpaid final wages on behalf of herself and a purported class of similarly situated agents. The factual record was very strong for the defense as to the limited control Mutual of Omaha exercised over Arnold (and its other agents):

(1) The contract Arnold signed with Mutual of Omaha expressly stated that the parties understood it was an independent contractor agreement.

(2) Her chief duties were to procure and submit insurance applications, collect money, and service clients.

(3) She was compensated entirely on commissions for products sold, with a chargeback if money was uncollected or refunded.

(4) She received no performance evaluations and nobody at Mutual of Omaha monitored or supervised her work schedule. Plaintiff decided when, where, and to whom she would market insurance.

(5) Although Mutual of Omaha provided some training on its products and sales techniques, it was not mandatory for ICs to take the training. The only mandatory training was as to compliance with certain state insurance laws and regulations.

(6) Mutual of Omaha provided some office space if agents wanted to use it, but it was optional, and agents had to pay for the "workspace and telephone service." Mutual of Omaha also did not pay for business cards or any other business expenses, although it provided certain services for a fee if an IC wanted them.

(7) Under the IC agreement in place, either party could terminate the relationship at any time with or without cause, or if Arnold failed to sell a Mutual of Omaha product for 180 days.

On this record, the trial court granted summary judgment to Mutual of Omaha that Arnold was an independent contractor rather than...