John Weary v. William S. Cochran

377 F.3d 522, 2004 U.S. App. LEXIS 15589, 85 Empl. Prac. Dec. (CCH) 41,777, 94 Fair Empl. Prac. Cas. (BNA) 390, 2004 WL 1687952

• Court: Court of Appeals for the Sixth Circuit
• Decided: July 29, 2004
• Docket: 03-5143
• Status: Published

Opinions

MARTIN, J., delivered the opinion of the court, in which MILLS, D. J., joined. CLAY, J. (pp. 528-38), delivered a separate opinion.

BOYCE F. MARTIN, JR., Circuit Judge.

John Weary appeals the district court’s dismissal of his complaint alleging claims under the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq., and under Tennessee state law against Northwestern Mutual Life Insurance Company and William S. Cochran. For the reasons that follow, we AFFIRM.

I.

Northwestern Mutual Life Insurance Company markets its products through “General Agents,” who in turn contract with “Special Agents.” Northwestern Mutual hired William S. Cochran as its General Agent and granted him the exclusive contractual right to market Northwestern Mutual products in Tennessee. Cochran’s insurance agency was located in Nashville and, as of January 2000, had nearly one hundred Special Agents under contract. Weary served as one of those Special Agents from 1973 until 2000.

The contract governing Weary’s business relationship with Cochran, called the “Full-Time Special or Soliciting Agent’s Contract,” provided that the “Agent [Weary] shall be an independent contractor and nothing herein shall be construed to make Agent an employee of the Company [Northwestern Mutual], General Agent [Cochran], or First Party [Cochran].” Weary was paid solely upon a commission basis, and agreed to meet certain minimum selling standards set by Northwestern Mutual and Cochran. Cochran set higher standards than Northwestern Mutual, as he was permitted to do, and when Weary failed to meet his minimum earnings standards in 1998 and 1999, Cochran fired him. At the time of his termination, Weary was over forty years of age. Weary filed a claim with the Equal Employment Opportunity Commission, asserting that he was impermissibly terminated because of his age. The Commission found, however, that no employer-employee relationship had existed. Thus, the Commission closed its file and issued a right to sue letter.

Weary then filed the instant complaint against Northwestern Mutual and Cochran, asserting claims under the Age Discrimination in Employment Act, as well as state law claims for breach of contract, breach of the duty of good faith and fair dealing, fraud in the inducement to contract and negligent or intentional misrepresentation. The district court awarded summary judgment in favor of Northwestern Mutual and Cochran on the federal age discrimination claims, holding that neither qualified as Weary’s “employer” within the meaning of the Act. Having dismissed the federal claims, the district court also dismissed the state law claims for lack of jurisdiction.

II.

The sole issue in this appeal is whether Weary was an “employee” of Northwestern Mutual or Cochran within the meaning of the Act. In analyzing the district court’s resolution of this issue, we employ de novo review, using the same standard under Federal Rule of Civil Procedure 56(c) used by the district court. Shah v. Deaconess Hosp., 355 F.3d 496, 498 (6th Cir.2004). Summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c). In viewing the evidence, we must draw all reasonable inferences in favor of Weary, as the nonmov-ing party. Shah, 355 F.3d 496.

Like other federal employment discrimination statutes, the Age Discrimination in Employment Act protects employees, but not independent contractors. Shah, 355 F.3d at 499; Simpson v. Ernst & Young, 100 F.3d 436, 438 (6th Cir.1996). The determination of whether a plaintiff qualifies as an employee under the Act “is a mixed question of law and fact” that a judge normally can make as a matter of law. Lilley v. BTM Corp., 958 F.2d 746, 750 n. 1 (6th Cir.1992). As a general matter, this Court has repeatedly held that insurance agents are independent contractors, rather than employees, in a variety of contexts. See, e.g., Ware v. United States, 67 F.3d 574 (6th Cir.1995) (insurance agent was an independent contractor for tax purposes); Wolcott v. Nationwide Mut. Ins. Co., 884 F.2d 245 (6th Cir.1989) (insurance agent was an independent contractor under ERISA); Plazzo v. Nationwide Mut. Ins. Co., 892 F.2d 79, 1989 WL 154816 (6th Cir. Dec.22, 1989) (unpublished opinion) (same). Other courts are in accord with this view. See, e.g., Butts v. Comm’r of Internal Revenue, 49 F.3d 713 (11th Cir.1995) (insurance agents were independent contractors for tax purposes); Oestman v. Nat’l Farmers Union Ins., 958 F.2d 303 (10th Cir.1992) (insurance agent was an independent contractor under the Age Discrimination in Employment Act).

We have recently clarified that the proper test to apply in determining whether a hired party is an employee or an independent contractor under the Act is the “common law agency test” set forth in Nationwide Mutual Insurance Company v. Darden, 503 U.S. 318, 322, 112 S.Ct. 1344, 117 L.Ed.2d 581 (1992). See Shah, 355 F.3d at 499. In Darden, the Supreme Court described the common law agency test as follows:

In determining whether a hired party is an employee under the general common law of agency, we consider the hiring party’s right to control the manner and means by which the product is accomplished. Among the other factors relevant to this inquiry are the skill required; the source of the instrumentalities and tools; the location of the work; the duration of the relationship between the parties; whether the hiring party has the right to assign additional projects to the hired party; the extent of the hired party’s discretion over when and how long to work; the method of payment; the hired party’s role in hiring and paying assistants; whether the work is part of the regular business of the hiring party; whether the hiring party is in business; the provision of employee benefits; and the tax treatment of the hired party.

Darden, 503 U.S. at 323-24, 112 S.Ct. 1344; see also Shah, 355 F.3d at 499-500; Simpson, 100 F.3d at 443. “Since the common-law test contains no shorthand formula or magic phrase that can be applied to find the answer, ... all of the incidents of the relationship must be assessed and weighed with no one factor being decisive.” Darden, 503 U.S. at 324, 112 S.Ct. 1344. Of the applicable Darden factors,¹ the vast majority weigh in favor of characterizing Weary as an independent contractor, rather than an employee.

The crux of Darden’s common law agency test is “the hiring party’s right to control the manner and means by which the product is accomplished.” 503 U.S. at 323, 112 S.Ct. 1344. This is a broad consideration that is embodied in many of the specific factors articulated in Darden. Our analysis of those factors — which is set forth below — reflects upon, and is relevant to, this core issue of control. Before turning to those specific factors, however, we consider in a more general manner the extent to which Northwest Mutual or Cochran had the right to control the manner and means by which Weary marketed and sold life insurance policies.

We begin by noting two pieces of evidence that shed light on how the parties themselves viewed the nature of their working relationship. First, the Special Agent Contract characterized Weary as an “independent contractor” and explicitly cautioned that “nothing herein shall be construed to make [him] an employee” of Northwestern Mutual or Cochran. This evidence, while not dispositive of the issue, is certainly relevant to the inquiry. See, e.g., Eyerman v. Mary Kay Cosmetics, Inc., 967 F.2d 213, 218 (6th Cir.1992) (emphasizing that a cosmetic salesperson’s employment agreement “unambiguously declared [her] to be an independent contractor”); Wolcott v. Nationwide Mut. Ins. Co., 884 F.2d 245, (6th Cir.1989) (noting the significance of the employment agreement’s characterization of the plaintiff insurance agent as “an independent contractor and not an employee”); Daughtrey v. Honeywell, Inc., 3 F.3d 1488, 1492 (11th Cir.1993) (the fact that the consultant agreement stated that the plaintiff was hired as an independent contractor was “probative of the parties’ intent” regarding the nature of the employment relationship).

Second, Weary admitted in his deposition that he intended to be an independent contractor:

Q. So by contract, you agreed that you were an independent contractor and not an employee of Mr. Cochran or Northwestern Mutual, correct?

A. According to this document and what I was led to believe, the answer is yes, but the law says if one party has control over the other party, then it doesn’t make any different what the parties to the contract call themselves, you have an employer/employee relationship.

Q. What I get confused about that, Mr. Weary, is going back to your initial comments ... in essence, you intended that to be true, correct?

A. That’s correct. But I—

Q. You have intended, to be an independent contractor, didn’t you?

A. I did. But the law changed the contract.

(Emphasis added).

In addition to this evidence concerning the parties’ intent, the record is replete with other evidence — much of which Weary himself has admitted — indicating that Weary was an independent contractor who, for the most part, had the right to control — and did, in fact control — the manner and means by which he accomplished his own work. For example, and as discussed in greater detail below in connection with the more specific Darden factors, Weary was paid solely on a commission basis; he was free to take other jobs — and, in fact, sold insurance policies for approximately fourteen other insurance companies; he set his own hours and could take vacation at his leisure; he employed his own staff and paid them out of his own pocket; he decided whom to solicit for business; he paid for his own office space, equipment, supplies, car and travel expenses; and he kept his own financial records and monitored his own profit and loss. This is just a sampling of the abundant evidence in the record pointing toward independent contractor status.

We recognize, as the dissent points out, that Weary’s independence was not entirely unrestrained. He was required, for instance, to comply with applicable legal and ethical rules and certain administrative guidelines set out in a Northwest Mutual manual. That limited authority that Northwest Mutual retained over these aspects of Weary’s work, however, is “not the type of control that establishes an employer/employee relationship.” Oestman, 958 F.2d at 306 (finding plaintiff to be an independent contractor despite being required to obtain permission from the defendant before advertising any of defendant’s products). See also Ware, 67 F.3d at 576 (holding that an insurance salesman was an independent contractor despite being required to comply with various guidelines set by the insurance company); Kirby v. Robby Len Swimfashions, 904 F.2d 36, 1990 WL 72322 at **3 (6th Cir.1990) (Table) (“While [defendant] required orders and paper work to be administered on [its] forms and in conjunction with [its] practices, the infringement of [plaintiffs] discretion in the affairs of his business by these requirements was minimal”). Northwestern Mutual’s authority over those aspects of Weary’s operations is understandable, see Oestman, 958 F.2d at 306 (reasoning that defendants “have a substantial interest in controlling the advertising of their products because [they] may be liable for [the plaintiffs] misstatements or misrepresentations”), and does not undermine our conclusion that, in general, Weary controlled the manner and means by which he performed his job.

The more specific factors articulated in Darden also favor characterizing Weary as an independent contractor. The first factor relates to the skill required to perform the job in question. In Schwieger v. Farm Bureau Insurance Co., 207 F.3d 480, 485 (8th Cir.2000), the court found that this factor “weighted] heavily in favor of independent contractor status” where the insurance agent “considered herself an insurance professional: she was licensed by the state of Nebraska at her own expense, was subject to a code of professional ethics, and had been certified by professional associations.” In this case, Weary admitted that the sale of insurance is a “highly specialized field,” requiring considerable “training,” “education” and “skill.” He also admitted that a state license was required in order to sell insurance and that he had taken licensure examinations in “several” states. Weary held a specialized “Series VI” license for the sale of securities, a Chartered Life Underwriter certification and a business administration degree. Thus, this factor weighs in favor of independent contractor status.

Second, the source of instrumentalities and tools used in Weary’s business was Weary himself, not Northwest Mutual or Cochran. Weary admits that he paid for and procured his own office equipment, internet and phone service, postage, copies and automobile. He also paid for meals with prospective clients and for his attendance at professional training courses.

Third, with respect to the location of Weary’s work, he admits that he worked either at his home office or at commercial office space that he rented at his own expense. He did not work at offices owned or controlled by Northwestern Mutual or Cochran. Therefore, this factor weighs in favor of independent contractor status. See Wolcott, 884 F.2d at 251 (relying upon the fact that an insurance agent owned and maintained his own office condominium in finding him to be an independent contractor).

Fourth, Weary admits that neither Northwestern Mutual nor Cochran had any authority or discretion regarding when or how long he worked, except to require him to attend periodic compliance meetings and sales meetings and to meet minimum selling standards. Weary was free to take vacation at his leisure and did not report his hours to anyone.

Fifth, the fact that Weary was paid solely upon a commission basis and did not earn a salary lends further support to the conclusion that he was an independent contractor. See, e.g., Ware, 67 F.3d at 578; Wolcott, 884 F.2d at 251.

Sixth, with regard to the hiring and paying of assistants, Weary admits that he employed his own staff at his own expense, had sole discretion in hiring, firing and compensation matters, and withheld and remitted taxes to the federal government in his capacity as the employer of his staff members. Weary points out that his affidavit states that Cochran required him to hire and maintain a secretary for twenty hours per week and if he did not, he would suffer a reduction in his expense allowance. That fact is insignificant, however, because it says nothing about whether Northwestern Mutual or Cochran played any role in hiring or paying Weary’s assistants. The affidavit only alleges that Cochran required Weary to hire and pay a secretary to work at least twenty hours per week.

The seventh and eighth factors relate to the provision of benefits and tax treatment. Weary places particular emphasis on the fact that Northwestern Mutual provided him certain pension and health benefits and that it withheld social security taxes from his commissions. As the district court held, however, the Internal Revenue Code permitted Northwestern Mutual to provide those benefits and to withhold those taxes because of Weary’s status as a non-employee. See, e.g., 26 U.S.C. § 3121(d) (permitting a “full time life insurance salesman” who is not a common law employee to be deemed an employee “for purposés of this chapter” — i.e., Chapter 21, Federal Insurance Contributions Act); 26 U.S.C. § 7701(a)(2) (permitting a “full time life insurance salesman who is considered an employee for the purpose of Chapter 21 to be deemed a statutory ‘employee’ who is entitled to participate in group pension and benefit plans).” The district court found that Weary “admitted to being informed of his ‘statutory employee’ status.” The district court found it even “[m]ore instructive” that Weary deducted his profits and losses on his own tax returns as a sole proprietor and declared on loan documents that he was self-employed. We agree with the district court that these factors also sway the balance in favor of independent contractor status.

While at least two factors weigh in favor of characterizing Weary as an employee— 1.e., the duration of the relationship and the fact that Weary’s work was a regular part of the hiring party’s business² — those factors do not offset the overwhelming evidence that compels the opposite conclusion.

In sum, we hold that Weary was an independent contractor, not an employee, and was, accordingly, not entitled to protection under the Age Discrimination in Employment Act. His claim under the Act having been properly dismissed for this reason, the district court was entitled, as Weary admits, to dismiss the remaining state law claims as well.

For these reasons, the district court’s judgment is AFFIRMED.

1 . The parties agree that the factor relating to whether the hiring party is in business is irrelevant and unhelpful to this analysis, as almost any hiring party is in business.

2 . Whether the hiring party may assign additional responsibilities may also arguably weigh in Weary's favor, although it is not entirely clear that this factor is applicable under the facts of this case.