Court Certifies Allstate Agents' Harassment Claims
Denies Certification of Breach Claims
A class action was certified June 21 by the U.S. District Court
for the Northern District of Illinois consisting of former Allstate Insurance
Co. employee-agents who alleged the company harassed them into resigning so as
to prevent them from obtaining benefits under a lucrative severance plan
(Flanagan v. Allstate Insurance Co., N.D. Ill., No. 01 C 1541, 6/21/04).
Judge James B. Moran found that the employee-agents' class action posed the
common question of whether Allstate implemented new employment conditions that
were meant to harass agents into retiring, quitting, or converting to
independent contractors so they would be ineligible for severance benefits.
But the court refused to grant class action status to the employee-agents' claim
that Allstate breached its Employee Retirement Income Security Act fiduciary
duties by misrepresenting or concealing the fact that a new severance plan was
under serious consideration. In so ruling, the court rejected the
employee-agents' assertion that they could maintain their fiduciary breach claim
on a class-wide basis because Allstate breached its fiduciary duties by failing
to provide material information to the agents, even in the absence of specific
requests for such information.
According to the court, the fiduciary breach claim was not suitable for class
action status because, even if Allstate made misrepresentations to the agents,
the statements were made orally rather than in writing and the court would be
called on to make individualized determinations as to what was said to each
agent.
Allstate's Overhaul
The lawsuit stems from Allstate's decision in 1998 and 1999 to
change its sales force from employee-agents to independent contractors. The
lawsuit alleged that in an effort to achieve its goal of eliminating
employee-agents in favor of independent contracts, Allstate harassed its
employee-agents by: (1) asserting more control over them by requiring attendance
at training sessions; (2) extending employee-agents' office hours; (3) reducing
or eliminating reimbursable office expenses; (4) setting unrealistic sales
quotas; (5) threatening employment termination; and (6) imposing burdensome
reporting requirements.
According to the court, between Dec. 1, 1998, and May 31, 1999, 176
employee-agents quit and 1,106 agents became independent contractors.
Allstate announced in November 1999 its plan to use only
independent contractors as sales agents. At this time, the company announced its
agent transition severance plan to provide benefits to employee-agents who left
their position or became independent contractors after June 1, 1999.
A group of employee-agents who left Allstate before June 1,
1999, brought a class action alleging the company violated ERISA Section 510 by
using tactics that were meant to harass agents into retiring, quitting, or
converting to independent contractors so they would be ineligible for current
and future ERISA benefits. The employee-agents also alleged Allstate breached
its ERISA fiduciary duties by misrepresenting or concealing the fact that the
agent transition severance plan was under serious consideration.
The Harassment Claim
The court agreed to grant class action status to the
employee-agents' claim that they were harassed into quitting their jobs in
violation of ERISA Section 510.
"[I]n this case, plaintiffs establish a common question regarding their claim of
Allstate's violation of [Section] 510 of ERISA, because Allstate's alleged
harassment was instituted through agency-wide directives applied to all
employee-agents. The common question posed by the harassment claim transcends
the class members' differences regarding office locations, manager and
employment contracts," the court said.
In addition, the court said that even if the employee-agents' individual
experiences at Allstate may have differed, each of their claims for violation of
ERISA Section 510 "stems from Allstate's new rules and regulations."
Fiduciary Breach Claim Won't be Certified
But the court refused to grant class action status to the
employee-agents' claim that Allstate breached its fiduciary duties by making
misrepresentations and omissions regarding the severance plan that was under
serious consideration at the time they left the company or became independent
contractors.
According to the court, proving a breach of fiduciary duty would require that
each class member show that he or she asked an Allstate representative about the
possibility of new benefits and was misled. The court rejected the
employee-agents' claim that Allstate breached its fiduciary duties by not
voluntarily providing information about the plan.
"[A] fiduciary's omission is a breach when it fails to provide complete
information in response to a beneficiary's question, or fails to correct
misinformation it previously provided," the court said in finding that Allstate
had no duty to voluntarily disclose information about the upcoming agent
transition severance plan.
The employee-agents were represented by Lawrence Walner of Lawrence Walner &
Associates, Chicago,
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