High Stakes Trial
Former California-based agents Robert Marx, Kevin Keating, Tom Mortensen and Mike Guarino were the first to go to trial on March 13 out of dozens of complainants (hence referred to as a “high stakes” trial) also accusing Farmers Group and its exchanges — Farmers Insurance Exchange, Fire Insurance Exchange, Truck Insurance Exchange, Mid-Century Insurance Co. and Farmers New World Life Insurance Co. — of age discrimination and wrongful termination.
The former agents argued that a Farmers’ program called "Managing Underperforming Agents" was set up to take clients from older agents before firing them and replacing them with agents in their 30s, who were also given their old business. Jurors were told that under the program, fewer than 10% of allegedly underperforming agents remained at Farmers Group, and that the average age of terminated agents was 59, versus an average age of 45 for the replacement agents, "a difference of 14 years."
First up, jurors were told how, in 2017, a Farmers district manager and an area sales manager "berated and threatened" to fire Keating for not investing enough of his own money on staff and marketing. At the same time, Keating was told the insurance business was a "young man's business.” Keating’s attorney pointed out that the company’s “Managing Underperforming Agents" initiative was focused on hiring younger agents who would bring in more lucrative new insurance policies, allegedly at the expense of older, established agents who had long-term clients who renewed policies annually at discounted prices. He further noted that due to this initiative, about 1,000 agents — half of them in California — were fired in three waves between 2018 and 2020, and the clients of those fired agents were then given to younger agents who were paid less.
Marx, age 65, testified that he thought his "life was over" and “everything I had worked for had been taken away from me,” when Farmers Group took business he spent decades building. Three years ago, at age 62, his supervisor abruptly fired him, and he had "no closure" and "no idea it was coming," he said, in tears. According to Law360, Marx broke down in tears several times recounting his lengthy career (since the late 1980s) as an insurance agent, and how his firing has been devastating. His wife took the stand. Rochelle Marx also cried as she told the jury how they had to sell the family’s vehicles and they were likely going to lose their house and had too little equity or income to buy another. She further told how her husband, after losing his job, had been depressed, lost his appetite, was "embarrassed, emasculated, distraught," and had worried constantly about their finances.
But the jury was not swayed by tears.
Also brought to the jurors’ attention was an internal email sent to more than 10 executives in May 2019 by then-Farmers Group CEO Jeff Dailey. Dailey wrote that he wanted a minimum of 3,000 agents "taken out by 2021," and that the company had "a lot of shit agents," so "finding [1,000] policies for a 100 or so good agents will be easy."
During the trial, the four “shit agents” or underperformers, hired an insurance industry expert who testified that Farmers Group, whose parent is Zurich Insurance Group, raked in billions of dollars annually raising premiums while making it more difficult for established agents like Marx to draw in new customers, reported Law360.
Plaintiffs’ attorneys provided evidence showing Farmers Group saved 440% on commissions when it replaced agents. As well, Farmers Group's financial statements show the company was making billions of dollars in profits annually and a recent financial statement shows it had $17 billion in assets.
Independent Contractors vs. Employees
Plainttiffs’ attorneys tried to convince the jury that the company imposed performance standards and office requirements on the agents and controlled them as employees.
They called to the stand Dr. Jay Finkelman. The human resources expert testified that the plaintiffs signed initial contracts with Farmers as independent contractors, but since the 1980s and 1990s, their jobs had "shifted". And its "smart office program” is an effort to control agents as employees and manage their performance. He further noted that the language of the agents' initial hiring contracts is irrelevant when assessing whether a worker is in fact an independent contractor or an employee, and whether that worker has been misclassified. "It's not what you say you're going to do, it's what you're actually doing," Finkelman said.
For much of the trial Farmers Group tried to sway the jurors that its agents are independent contractors rather than employees. Farmers has "extensive" legal departments with attorneys who consider whether the agents constitute independent contractors and who keep "abreast of legal decisions across the country concerning that topic."
Farmers Group argued that the agents:
- Could not state what Farmers Group does
- Could not identify their purported sales managers.
- Filed their own taxes
- Swore to the IRS that they were either sole proprietors or independent [contractors],"
- Deducted their own office equipment and supplies,
The case is James Melin et al. v. Farmers Group Inc. et al., case number RG19001677, in the Superior Court of the State of California, County of Alameda.
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But at least 79 people, including the above plaintiffs and a man who sold insurance for Farmers 57 years, have not been supported. Instead, they have filed an age discrimination lawsuit claiming harassment and wrongful termination between June 2018 and April 2020. As well, the former agents also argue that Farmers misclassified them as independent contractors for tax and legal benefits.