3 Agents Sue Allstate for Breach of Contract
Three Allstate Insurance Co. agents have sued the giant insurer alleging breach of contract three years after the company fired 1,656 California agents and turned them into independent contractors.
The agents claim the company continues to treat its California exclusive agents as employees, controlling their businesses but not paying their business expenses or benefits costs.
Allstate counters that the standards agents are asked to meet are meant to ensure good customer service. The company also says its treatment of agents has been approved by the Internal Revenue Service, which in recent years has been notoriously tough on companies that attempt to claim independent contractor status for workers who are actually employees. Tax rules are generally more advantageous for companies employing independent contractors, and companies are not required to extend benefits to such workers.
“The IRS has issued a ruling to Allstate indicating our exclusive agent program is an independent contractor program,” said company spokeswoman April Hattori.
The lawsuit, which seeks class-action status, was filed in U.S. District Court in Los Angeles and seeks $100 million in damages.
Allstate fired its California agents April 30, 1996, in another class-action lawsuit by agents. The insurer agreed to pay $25 million to about 2,400 current and former agents who claimed Allstate was not covering major expenses.
