Judge Refuses to Halt Agents' Suit Against Allstate Insurance
A federal judge in Philadelphia has rejected a request by the
Allstate Insurance Company to dismiss a lawsuit by more than
6,000 agents. His action cleared the way for a trial on the
company's attempt to convert the agents to independent
contractors and remove their benefits, the company and lawyers
for the agents said yesterday.
In a ruling on Tuesday, Judge John P. Fullam of Federal
District Court declared that Allstate's insurance unit had not
discriminated on the basis of age, as the agents accused. But
he said that the company had improperly required the agents to
sign a release giving up their right to sue the company in
exchange for staying on as independent contractors or leaving
and receiving severance pay and other benefits.
Judge Fullam said that the 6,200 agents who had signed the
release could now rescind the action and proceed with their
lawsuit, provided that they returned to Allstate any benefits
they received in connection with the release.
The roughly 4,000 agents who stayed with Allstate as
independent contractors received a $5,000 bonus. The more than
2,000 who left received an average of $100,000 in severance
pay and were permitted to sell their agencies for, in many
cases, several hundred thousand dollars.
Allstate says it regards the proceeds of the sale of the
agencies as benefits, but the agents say they are entitled to
keep that money because it came from independent buyers and
not the insurance company.
Approximately 20 agents refused to sign and left the company
without receiving any special benefits, and Allstate had
contended that only they could properly bring a lawsuit.
The court's decision is the most definitive ruling yet in a
case that began nearly three years ago when the agents filed
their lawsuit.
A few months after they sued, the Equal Employment Opportunity
Commission also sued Allstate. Both lawsuits claimed that
Allstate's requirement that the agents surrender their rights
to sue violated federal laws, and the agents also accused the
company of age discrimination because 90 percent of those
involved were older than 40.
The agents and the employment commission may proceed on the
issue of the release, although Allstate may introduce new
objections. The judge also dismissed a claim by the agents
that Allstate had violated pension laws. Michael J. Wilson, a
lawyer for the agents, said his clients were delighted with
the judge's decision.
At Allstate, Michael J. Trevino, a spokesman, said the company
was pleased the judge had found no age discrimination and had
dismissed other elements of the case.
As for a reaction on the judge's ruling permitting the case to
proceed, and whether Allstate would appeal the decision, Mr.
Trevino said: "We are currently considering our options."
Mr. Trevino said Allstate continued to believe that the
release was "valid and enforceable." Legal experts said
earlier that if the judge permitted the case to proceed,
pressure would increase on Allstate to settle. But yesterday,
Mr. Trevino gave no indication that Allstate was considering a
settlement. Instead, he said the company planned "to continue
to vigorously defend the litigation."
Judge Fullam said he found no basis for age discrimination
"for the simple reason that employees of all ages were treated
alike" as Allstate moved to streamline its sales operations
and cut costs. He said that it was irrelevant that the agents
had claimed that an overwhelming majority were protected by
federal antidiscrimination laws.
Nevertheless, the judge based his ruling against the Allstate
release on a section of federal law entitled "the Older
Workers' Benefit Protection Act." He said the releases, "on
their face, violate" the law. Quoting from the act, he said
that no waiver agreement could prohibit anyone from "filing a
charge or complaint, including a challenge to the validity of
the waiver agreement, with the E.E.O.C."
Judge Fullam said earlier that he was inclined to certify the
agents' lawsuit as class actions but he provided few details.
In his latest ruling he said he intended to certify two
classes among the plaintiffs: those who signed the release and
those who did not.
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