Employment/ERISA-Ninth Circuit Rules That A Career Agent Is An Independent Contractor For Purposes of Title VII (And Probably ERISA Too)

In Murray v. Principal Financial Group, Inc., No. 09-16664 (9th Cir. 2010), the plaintiff, Patricia Murray, is a “career agent” for the defendants, collectively called “Principal”. Principal’s career agents sell Principal products, which include a wide range of financial products and services. Here, Murray sued Principal for sex discrimination in violation of Title VII. The only issue faced by the Ninth Circuit is whether Murray is an “employee” under Title VII, as opposed to being an independent contractor, since she is protected under Title VII only if she is an employee.

The Court noted that insurance agents have consistently been held to be independent contractors, and not employees, for purposes of various federal employment statutes, such as ERISA, the ADEA and Title VII. The question though, is the appropriate test for determining an individual’s status under those statutes. There are three candidates that have been used-the common law agency test, the economic realities test and the common law hybrid test: The Court said that the common law agency test, as applied by the Supreme Court in Nationwise Mutual Insurance Co. v. Darden, 503 U.S. 318 (1992), is the correct test. This test focuses on the hiring party’s right to control the manner and means by which the product is accomplished. As set out in Darden, the factors relevant to this inquiry are: (1) the skill required; (2) the source of the hired individual’s instruments and tools; (3) the location of the work; (4) the duration of the relationship between the hiring and hired parties; (5) whether the hiring party has the right to assign additional projects to the hired party; (6) the extent of the hired party’s discretion over when and how long to work; (7) the method of payment; (8) the hired party’s role in hiring and paying assistants; (9) whether the work is part of the regular business of the hiring party; (10) whether the hiring party is in business; (11) the provision of employee benefits; and (12) the tax treatment of the hired party.

Applying these factors to the instant case, the Court found that Murray is an independent contractor for purposes of Title VII. She is free to operate her business as she sees fit, without day-to-day intrusions. Murray decides when and where to work, and in fact maintains her own office, where she pays rent. She schedules her own time off, and is not entitled to vacation or sick days. Also, she is paid on commission only, reports herself as self-employed to the IRS, and sells products other than those offered by Principal in limited circumstances. The few factors which support employee status-such as the provision of some benefits, a long-term relationship with Principal, having an at-will contract, and being subject to certain minimum standards imposed by Principal- do not overcome the indications that Murray is an independent contractor.

Based on the discussion by the Court, Murray would likewise be treated as an independent contractor for ERISA purposes.