UNITED STATES COURT OF APPEALS

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit I.O.P. 32.1(b)

File Name: 19a0012p.06

FOR THE SIXTH CIRCUIT

WALID JAMMAL; KATHLEEN TUERSLEY; CINDA J.

DURACHINSKY; NATHAN GARRETT,

Plaintiffs-Appellees,

AMERICAN FAMILY INSURANCE COMPANY; AMERICAN

FAMILY MUTUAL INSURANCE COMPANY; AMERICAN

FAMILY LIFE INSURANCE COMPANY; AMERICAN

STANDARD INSURANCE COMPANY OF WISCONSIN;

AMERICAN FAMILY TERMINATION BENEFITS PLAN;

RETIREMENT PLAN FOR EMPLOYEES OF AMERICAN

FAMILY INSURANCE GROUP; AMERICAN FAMILY 401K

PLAN; GROUP LIFE PLAN; GROUP HEALTH PLAN;

GROUP DENTAL PLAN; LONG TERM DISABILITY PLAN;

AMERICAN FAMILY INSURANCE GROUP MASTER

RETIREMENT TRUST; 401K PLAN ADMINISTRATIVE

COMMITTEE; COMMITTEE OF EMPLOYEES AND DISTRICT

MANAGER RETIREMENT PLAN,

Defendants-Appellants.

┐

│

┘

No. 17-4125

Appeal from the United States District Court

for the Northern District of Ohio at Cleveland.

No. 1:13-cv-00437—Donald C. Nugent, District Judge.

Argued: July 31, 2018

Decided and Filed: January 29, 2019

Before: BOGGS, CLAY, and ROGERS, Circuit Judges.

_________________

COUNSEL

ARGUED: Pierre H. Bergeron, SQUIRE PATTON BOGGS (US) LLP, Cincinnati, Ohio, for

Appellants. Charles J. Crueger, CRUGER DICKINSON LLC, Whitefish Bay, Wisconsin, for

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Appellees. ON BRIEF: Pierre H. Bergeron, Lauren S. Kuley, Scott W. Coyle, Colter Paulson,

SQUIRE PATTON BOGGS (US) LLP, Cincinnati, Ohio, Gregory V. Mersol, Gilbert Brosky,

BAKER & HOSTETLER LLP, Cleveland, Ohio, for Appellants. Charles J. Crueger, Erin K.

Dickinson, CRUGER DICKINSON LLC, Whitefish Bay, Wisconsin, Gregory F. Coleman,

GREG COLEMAN LAW PC, Knoxville, Tennessee, Edward A. Wallace, Kara A. Elgersma,

WEXLER WALLACE LLP, Chicago, Illinois, Drew T. Legando, LANDSKRONER GRIECO

MERRIMAN, LLC, Cleveland, Ohio, for Appellees. J. Philip Calabrese, PORTER WRIGHT

MORRIS & ARTHUR LLP, Cleveland, Ohio, C. Darcy Copeland Jalandoni, PORTER

WRIGHT MORRIS & ARTHUR LLP, Columbus, Ohio, Shay Dvoretzky, JONES DAY,

Washington, D.C., Paulo B. McKeeby, Ronald E. Manthey, MORGAN, LEWIS & BOCKIUS

LLP, Dallas, Texas, Mary Ellen Signorille, AARP FOUNDATION LITIGATION, Washington,

D.C., Seth R. Lesser, KLAFTER OLSEN & LESSER LLP, Rye Brook, New York, for Amici

Curiae.

BOGGS, J., delivered the opinion of the court in which ROGERS, J., joined. CLAY, J.

(pp. 16–25), delivered a separate dissenting opinion.

_________________

OPINION

_________________

BOGGS, Circuit Judge. In this class action, the named plaintiffs represent several

thousand current and former insurance agents for American Family Insurance Company and its

affiliates (collectively, “American Family” or “the company”). The agents claim that American

Family misclassified them as independent contractors, while treating them as employees, in order

to avoid paying them benefits in compliance with the Employee Retirement Income Security Act

of 1974 (“ERISA”).

The sole issue in this interlocutory appeal concerns the nature of the parties’ legal

relationship: are the plaintiffs employees or independent contractors for American Family? The

company appeals the district court’s judgment that the plaintiffs are employees. Because

American Family properly classified its agents as independent contractors, we reverse.

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As with many insurance companies, American Family sells its products primarily through

a network of insurance agents. American Family, in keeping with common industry practice,

classifies its agents as independent contractors rather than employees.

Taking issue with this designation and the consequences it has on their ability to enjoy

the protections of ERISA, the plaintiffs brought a proposed class action against American Family

in 2013, alleging that the company misclassified them as independent contractors. The plaintiffs

contended that their miscategorization “deprived [them] of the rights and protections guaranteed

by state and federal law to employees, including their rights under ERISA.” They sought, inter

alia, a declaratory judgment that they are employees for all purposes, including but not limited to

ERISA, and that as employees they are due benefits under ERISA.

Both parties filed several pre-trial motions, including motions by American Family to

dismiss and later for summary judgment. The plaintiffs, for their part, moved for class

certification. The district court granted the plaintiffs’ motion and denied each of American

Family’s motions in whole or in part. The company sought permission from this court to appeal

the district court’s order granting class certification, but we denied the company’s request. The

district court subsequently denied two motions by American Family to decertify the class.

The case then proceeded to trial, which the district court bifurcated to allow for

determination of the threshold question of the plaintiffs’ employment status. Trial of this single

issue took place before an advisory jury, pursuant to Federal Rule of Civil Procedure 39(c)(1),

which permits district courts to “try any issue with an advisory jury” in an action that is “not

triable of right by a jury.”

During the twelve-day trial, the jury learned that the parties took many steps to structure

their relationship consistent with American Family’s position that its agents are independent

contractors. Most pointedly, at the outset of the agents’ tenure with the company, all agents

Plaintiffs seeking relief under ERISA generally have no right to have their claims decided by a jury. See,

e.g., Wilkins v. Baptist Healthcare Sys., 150 F.3d 609, 616 (6th Cir. 1998); Bittinger v. Tecumseh Prods. Co.,

123 F.3d 877, 882–83 (6th Cir. 1997); Bair v. Gen. Motors Corp., 895 F.2d 1094, 1096–97 (6th Cir. 1990).

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signed a written agreement stating that they were independent contractors rather than employees.

In keeping with this designation, the agents file their taxes as independent contractors and deduct

their business expenses as self-employed business owners. American Family also pays its agents

in commissions and does not provide them with vacation pay, holiday pay, sick pay, or paid time

off.

Moreover, as the district court recounted, “[t]he company calls its agents ‘business

owners’ and ‘partners’ and tells new agents they will be ‘agency business’ owners and that they

need to ‘invest’ in ‘their business.’” The agents work out of their own offices, set their own

hours, and hire and pay their own staff. They also are responsible for providing most of the

resources necessary to run their agencies, such as office furniture and office supplies.

But the plaintiffs also presented significant evidence to support their claim that American

Family treats them more like employees than independent partners and business owners. The

company classifies everyone in its sales force—other than its agents—as employees.

Nevertheless, the company’s training manuals refer to the agents as “employees.” Each agent

must report to an Agency Sales Manager, and the plaintiffs presented testimony that American

Family did not train these managers to treat the agents as independent contractors or even make

the managers aware that the agents were classified as such.

According to the plaintiffs, the managers exerted a great amount of control over their

day-to-day activities. The managers insisted, among other required tasks, that the agents

complete daily activity reports, prioritize selling certain insurance policies, and participate in

“life-call” nights in which the agents had to stay after normal business hours to solicit life

insurance by calling prospective customers. The plaintiffs also offered testimony that the

company retained some authority to approve or disapprove of the location of the agents’ offices

and to be involved in the hiring and firing of the agents’ staff in a way that limited the plaintiffs’

ability to run their own agencies.

The jury also heard testimony that American Family teaches agents everything they need

to know to become licensed, run an agency, and sell the company’s products. All agents attend a

two-to-three-month-long comprehensive training program run by American Family on how to

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sell insurance and how to operate an agency. Once hired, the agents must sell insurance

exclusively for American Family, and they are discouraged—but not forbidden—from taking

other work, even if it is unrelated to the insurance industry. There is no limit on the duration of

the agency relationship, and American Family describes the agency position as a career position.

Although the agents are not eligible for the same pension or retirement plans given to the

company’s employees, they are offered an “extended earnings” benefit that is described to them

as a retirement plan.

When and if their relationship with the company does come to an end, the

agents are prohibited for a year from soliciting business from any of their former American

Family customers. And unlike most business owners, the agents cannot sell their agencies or

assign any rights to income from their agencies.

At the close of the trial, the court presented the advisory jury with the following

interrogatory:

Please answer the following question “yes” or “no” according to your findings:

Did Plaintiffs prove by a preponderance of the evidence that they are employees

of Defendant American Family?

The jury answered “yes.”

After giving the parties a final opportunity to present their proposed findings of fact and

conclusions of law, the court issued an opinion in which it acknowledged that although it was not

bound by the advisory jury’s determination, it believed that the jury’s verdict “comport[ed] with

the weight of the evidence presented at trial.” Accordingly, the district court determined that the

agents were employees for the purposes of ERISA.

The district court certified its ruling for an interlocutory appeal under 28 U.S.C.

§ 1292(b), and American Family filed a petition for interlocutory review of the court’s order.

The “extended earnings” program offered a lifetime annuity to agents and was reported as one of

American Family’s “Defined Benefit Plans” in its annual statement filed with insurance regulators. Agents were

automatically enrolled in these plans, did not contribute to these plans, and received increasing benefits with

increasing years of service.

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We granted permission to appeal, which American Family did, arguing that the district court

erred in determining that the plaintiffs are employees.

The determination of whether a plaintiff qualifies as an employee under ERISA is a

mixed question of law and fact that a judge normally can make as a matter of law. See Weary v.

Cochran, 377 F.3d 522, 524 (6th Cir. 2004); Waxman v. Luna, 881 F.2d 237, 240 (6th Cir.

1989). After a bench trial to determine a plaintiff’s employment status, this court typically

reviews a district court’s factual findings for clear error and its legal conclusions, including its

ultimate decision about the plaintiff’s status, de novo. Solis v. Laurelbrook Sanitarium & Sch.,

Inc., 642 F.3d 518, 522 (6th Cir. 2011). However, “[o]n interlocutory appeal under 28 U.S.C.

1292(b), our review is limited to the district court’s conclusions of law.” Sheet Metal Emp’rs

Indus. Promotion Fund v. Absolut Balancing Co., 830 F.3d 358, 361 (6th Cir. 2016). We review

those conclusions de novo, but “we have no authority to review the district court’s findings of

fact.” Nw. Ohio Adm’rs, Inc. v. Walcher & Fox, Inc., 270 F.3d 1018, 1023 (6th Cir. 2001).

“ERISA is a comprehensive statute designed to promote the interests of employees and

their beneficiaries in employee benefit plans.” Shaw v. Delta Air Lines, 463 U.S. 85, 90 (1983).

The plaintiffs brought this action under 29 U.S.C. § 1132(a), which enables “participant[s]” in an

employee benefit plan to enforce ERISA’s substantive provisions. Under ERISA, a “participant”

is “any employee or former employee of an employer . . . who is or may become eligible to

receive a benefit of any type from an employee benefit plan which covers employees of such

employer.” 29 U.S.C. § 1002(7). Therefore, the plaintiffs can prevail on their ERISA claims

only if they can show that they were American Family’s employees. Nationwide Mut. Ins. Co. v.

Darden, 503 U.S. 318, 321 (1992).

ERISA defines an “employee” as “any individual employed by an employer.” 29 U.S.C.

§ 1002(6). An “employer,” in turn, “means any person acting directly as an employer, or

The company also contends that the court’s determination was erroneous because it relied on non-

representative class evidence. Because we decide the case on other grounds, we do not reach this issue.

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indirectly in the interest of an employer, in relation to an employee benefit plan.” § 1002(5).

Because these definitions provide little guidance as to the meaning of “employee,” “the Supreme

Court has instructed courts to interpret the term by ‘incorporating the common law of agency.’”

Bryson v. Middlefield Volunteer Fire Dep’t, Inc., 656 F.3d 348, 352 (6th Cir. 2011) (quoting

Ware v. United States, 67 F.3d 574, 576 (6th Cir. 1995) (citing Darden, 503 U.S. at 322–24)).

In Darden, the Supreme Court provided the following standard “for determining who

qualifies as an ‘employee’ under ERISA.” 503 U.S. at 323.

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.

Id. at 323–24 (quoting Cmty. for Creative Non-Violence v. Reid, 490 U.S. 730, 751–52 (1989)).

In addition to these factors (“the Darden factors”), we have held that an express agreement

between the parties concerning employment status is also a relevant consideration. See Weary,

377 F.3d at 525.

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.’” Ibid. (quoting Darden, 503 U.S. at

323). Thus, “our analysis of [the Darden] factors . . . reflects upon, and is relevant to, this core

issue of control.” Ibid. “[T]he relative weight given each factor may differ depending upon the

legal context of the determination.” Ware, 67 F.3d at 578. “Notwithstanding this recognition

that certain factors may deserve added weight in some contexts, a court must evaluate all of the

incidents of the employment relationship.” Ibid.; see also Darden, 503 U.S. at 324 (“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

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factor being decisive.’” (alteration in original) (quoting NLRB v. United Ins. Co. of Am., 390 U.S.

254, 258 (1968)).

Applying the test from Darden and its progeny, the district court determined that the

plaintiffs were employees rather than independent contractors. After deciding that the Darden

factors were “almost evenly split between favoring employee status and favoring independent

contractor status,” the court proceeded to a broader analysis of the level of control that American

Family exercised over its agents. Ultimately, the court concluded that “[t]he degree of control

managers were encouraged to exercise was inconsistent with independent contractor status and

was more in line with the level of control a manager would be expected to exert over an

employee.” This, along with the evidence related to the other Darden factors, led the court to

determine that the plaintiffs were employees during the relevant class period.

Since in this interlocutory appeal we may review only the district court’s conclusions of

law, we must first decide which of the court’s determinations were matters of law and which

were factual. This much is clear: the district court’s findings underlying its holding on each of

the Darden factors are factual findings, and the court’s ultimate conclusion as to whether the

plaintiffs were employees is a question of law.

But what of the court’s conclusions about the Darden factors—both of their existence

and of the weight to be assigned them? Are these factual findings or conclusions of law?

Although neither party has provided much briefing on this question, the plaintiffs suggest that

these are issues of fact, while American Family claims that they are issues of law. The parties’

dispute is understandable, as we have yet to clarify whether and to what extent a court’s

conclusions about the individual factors that make up the Darden standard are factual or legal in

nature. Indeed, some of our decisions seem to be in tension with one another, with some

indicating that a district court’s determinations on the Darden factors are factual findings, see

Peno Trucking, Inc. v. C.I.R., 296 F. App’x 449, 454–60 (6th Cir. 2008) (stating, first, that the

appropriate rule is to review factual findings for clear error and, second, that the Tax Court’s

findings about control and other factors were not clearly erroneous); Moore v. Lafayette Life Ins.,

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458 F.3d 416, 440 (6th Cir. 2006) (concluding that the district court’s findings on Darden factors

were not clearly erroneous), and others suggesting that they are legal conclusions, see Janette v.

Am. Fid. Grp., Ltd., 298 F. App’x 467, 473–74 (6th Cir. 2008) (describing the proper tests for the

control factor and skill-required factor); Weary, 377 F.3d at 526 (explaining that a certain degree

of limited authority is not the type of control that establishes an employer-employee

relationship); id. at 532 (arguing that the majority erred in defining the skill-required factor and

explaining what the “legal issue” is concerning that factor) (Clay, J., dissenting).

Other circuits, however, have explicitly considered this question and have come down on

the side of treating these as factual matters subject to review for clear error. According to our

sister circuits:

The existence and degree of each factor is a question of fact while the legal

conclusion to be drawn from those facts—whether workers are employees or

independent contractors—is a question of law. Thus, a district court’s findings as

to the underlying factors must be accepted unless clearly erroneous, while review

of the ultimate question of employment status is de novo.

Brock v. Superior Care, Inc., 840 F.2d 1054, 1059 (2d Cir. 1988) (applying multi-factor

“economic reality” test to claim under FLSA); Berger Transfer & Storage v. Cent. States, Se.

and Sw. Areas Pension Fund, 85 F.3d 1374, 1377–78 (8th Cir. 1996); Dole v. Snell, 875 F.2d

802, 805 (10th Cir. 1989).

Granting due weight to our own and our sister circuits’ jurisprudence, we do not agree

that a district court’s conclusion relating to the existence and degree of each Darden factor is

entirely a question of fact. There is a distinction between a lower court’s factual findings, which

we review for clear error, and “the district court’s application of the legal standard to them,”

which we review de novo. Solis v. Laurelbrook Sanitarium and School, Inc., 642 F.3d 518, 522

(6th Cir. 2011). The lower court’s determination of a Darden factor often necessarily involves

the application of a legal standard to particular factual findings. Take, for example, Darden’s

first factor: “[W]hether the skill [required of an agent] is an independent discipline

(or profession) that is separate from the business and could be (or was) learned elsewhere.”

Weary, 377 F.3d at 532 (Clay, J., dissenting); see also Darden, 503 U.S. at 323. As Judge Clay

observed in his dissent in Weary, there is a “legal issue” inherent in the first factor as to whether

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to consider “the amount of skill required” or rather “whether the skill is an independent

discipline (or profession) that is separate from the business.” Weary, 377 F.3d at 532 (Clay, J.,

dissenting). Each Darden factor is thus itself a “legal standard” that the district court is applying

to the facts. See also Ware, 67 F.3d at 576 (distinguishing the “facts and circumstances”

underlying the Darden factors from both “the legal meaning and weight that those facts should

be given individually and in the aggregate”) (emphasis added). It is therefore appropriate for us

to review de novo those determinations to the extent that they involve the application of a legal

standard to a set of facts.

What’s more, as we recognized in Ware, “the relative weight given to each [Darden]

factor may differ depending upon the legal context of the determination.” Id. at 578 (emphasis

added). Thus, for example, “a hiring party’s control is more relevant in the context of copyright

ownership, because the statute assigns ownership on the basis of authorship unless the parties

explicitly agree otherwise,” but “less important in an ERISA context.” Ibid. This implies that

certain factors may carry more or less weight depending on the particular legal context in which

the independent-contractor relationship is being determined. Ibid. (noting that the “same test

might produce disparate results in different contexts”). Accordingly, it is also appropriate for us

to review de novo the district court’s weight assigned to of each of the Darden factors, given the

legal context in which the claim has been brought.

III

Here, the district court incorrectly applied the legal standards in determining the

existence of the Darden factors relating to (1) the skill required of an agent and (2) the hiring and

paying of assistants. Had the court applied those standards properly, it would have found that

those factors actually favored independent-contractor status. We analyze each of those factors

below.

Since we do not find that the district court applied an improper legal standard to any of the other Darden

factors, we do not address them here.

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The first factor under Darden looks to “whether the skill [required of an agent] is an

independent discipline (or profession) that is separate from the business and could be (or was)

learned elsewhere.” Weary, 377 F.3d at 532 (Clay, J., dissenting); see also Janette, 298 F. App’x

at 474. The district court held that the “amount of skill” factor under Darden weighs “slightly in

favor of employee status” primarily on the basis that American Family “sought out potential

agents who were untrained.” In doing so, the district court erred.

This circuit has previously held that the skill required of insurance agents weighs in favor

of independent-contractor status because “the sale of insurance is a highly specialized field” that

requires “considerable training, education, and skill.” Weary, 377 F.3d at 526–27 (internal

quotations omitted). The skill inquiry centers on whether the skill is an independent discipline

that “could be” learned elsewhere. Id. at 532 (Clay, J., dissenting). Though American Family

preferred hiring untrained, and often unlicensed, agents, the underlying discipline of selling

insurance remains the same regardless of American Family’s hiring preferences. Ibid.

(“[B]ecause the skill of selling insurance is a general one, the majority may be correct in its

conclusion that this factor favors independent contractor status.”). The district court therefore

misapplied the legal standard to the facts; the correct application would have weighed this factor

in favor of independent contractor status, as this circuit has done previously.

Darden’s eighth factor examines “the hired party’s role in hiring and paying assistants.”

Darden, 503 U.S. at 323–24. The court mistakenly weighed this factor as “neutral” after

concluding that the agents “had primary authority to hire their own staff” and were solely

responsible for all “staff compensation matters.”

The district court found, as a factual matter, that American Family agents were

responsible for paying their own staff, determining and paying for any benefits and taxes

associated with that staff, and deciding whether to classify their staff as employees or

independent contractors. While American Family provided “pre-approved” candidates, whom

the agents could select as their staff, it did not require the agents to hire these pre-screened

candidates. Agents also had sole discretion in staff-compensation matters and the sole

responsibility to withhold and remit taxes to the federal government as the employers of their

staff.

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On the other hand, American Family imposed qualifications on appointed agency staff,

including state licensure, clean driving records, education levels, credit history, and minimum

income-to-debt ratios. American Family did not provide computer access to any non-approved

appointed agency staff and required agency staff to agree to a lifetime non-solicitation

agreement. American Family had the right to fire any agency staff, appointed or non-appointed,

who did not live up to the American Family Code of Conduct, and it retained the right, although

rarely exercised, to fire agency staff for any reason. American Family managers were also

evaluated on the number of staff employed by their agents and would sometimes offer monetary

subsidies to agents to hire more staff.

Considering all of these facts, the district court determined that “[a]lthough American

Family retained some right to override an agent’s hiring and firing decision, on balance, agents

had primary authority over hiring and paying their assistants.” Yet the court inexplicably

concluded from that finding that the factor was “neutral.” This conclusion was contrary to

Darden’s language. If the hired party has the “primary authority over hiring and paying its own

assistants,” the Darden factor regarding “the hired party’s role in hiring and paying assistants”

should weigh in favor of independent-contractor status. Janette, 298 F. App’x at 475–76

(Because plaintiff “could have hired assistants, at her expense,” the factor favored independent-

contractor status.). Any other conclusion conflicts with Darden’s clear language.

Further, given our determination regarding the existence of each of the Darden factors,

the district court also erred by not properly weighing those factors that are particularly significant

in the legal context of ERISA eligibility. Darden asks us to look at the “hiring party’s right to

control the manner and means by which the product is accomplished,” which we have

determined to be “a broad consideration that is embodied in many of the specific factors

articulated” there. Weary, 377 F.3d at 525. But “the relative weight given each [Darden] factor

may differ depending upon the legal context of the determination.” Ware, 67 F.3d at 578. In

particular, “control and supervision is less important in an ERISA context, where a court is

That is to say, whether each Darden factor favors independent-contractor or employee status.

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determining whether an employer has assumed responsibility for a person’s pension status.”

Ibid. Because ERISA cases focus on the financial benefits that a company should have provided,

the financial structure of the company-agent relationship guides the inquiry. Here, the Darden

factors that most pertain to that financial structure favor independent-contractor status and,

accordingly, carry more weight in the ERISA context.

In this case, the district court found that the insurance agents invested heavily in their

offices and instrumentalities, paid rent and worked out of their own offices, earned commissions

on sales, were not eligible for employment benefits, and paid taxes as independent contractors.

Accordingly, the court weighed factors two (the source of the instrumentalities and tools), three

(the location of the work), seven (method of payment), eleven (provision of employee benefits),

and twelve (tax treatment) in favor of independent-contractor status.

We have now corrected

the district court’s weighing of factors one (the skill required) and eight (the hired party’s role in

hiring and paying assistants) to favor independent-contractor status, as well. Because this

inquiry exists in the legal context of ERISA benefits, this collection of factors—particularly the

ones relating to the source of the instrumentalities and tools, the method of payment, the

provision of employee benefits, and the agents’ tax treatment—is especially important in

determining the parties’ financial structure. Accordingly, these factors should have carried

greater weight in the district court’s final analysis. Had the court properly weighed those factors

in accordance with their significance, it would have determined that the entire mix of Darden

factors favored independent-contractor status.

As further evidence of the financial structure of the parties’ relationship, the lower court

should have also given greater weight to the parties’ express agreement. In determining the

parties’ relationship in the Darden context, we have several times “look[ed] to any express

agreement between the parties as to their status as it is the best evidence of their intent” and

placed great weight on that agreement. Janette, 298 F. App’x. at 471; Weary, 377 F.3d at 525

(noting that the existence of a contract characterizing Weary as an independent contractor is

The district court weighed the “method of payment” factor in favor of independent-contractor status for

agents “once they began selling policies out of their own office.” During the agents’ “training period,” the court

weighed the factor in favor of employee status.

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“certainly relevant to the inquiry” and shows “how the parties themselves viewed the nature of

their working relationship”). Our sister circuits have adopted this approach, as well. See Brown

v. J. Kaz., Inc., 581 F.3d 175, 181 (3d Cir. 2009) (noting that an independent-contractor

agreement “is strong evidence” of independent-contractor status); Schwieger v. Farm Bureau

Ins. Co. of Neb., 207 F.3d 480, 487 (8th Cir. 2000) (same). A written contract shows “how the

parties themselves viewed the nature of their working relationship” and therefore carries great—

but not dispositive—weight in determining an independent-contractor relationship. Weary,

377 F.3d at 525.

The Agent Agreement governing the parties’ business relationship here indicates that

they structured their relationship so that the agents should be treated as independent contractors.

Each Agreement contained a paragraph either identical to or substantively similar to the

following:

It is the intent of the parties hereto that you are not an employee of the Company

for any purpose, but are an independent contractor for all purposes, including

federal taxation with full control of your activities and the right to exercise

independent judgment as to time, place and manner of soliciting insurance,

servicing policyholders and otherwise carrying out the provisions of this

agreement. As an independent contractor you are responsible for your self-

employment taxes and are not eligible for various employee benefits such as

Workers and Unemployment Compensation.

The Agreement also provides that:

Rates, rules, regulations and all provisions contained in the Company’s Agent’s

Manuals and all changes to them shall be binding upon you. If any inconsistency

or ambiguity exists between this agreement and such rate, rule, regulation,

provision or other statement or statements, whether written or oral, this agreement

shall control.

(emphasis added). The Agency Agreement therefore states in wholly unambiguous terms that

agents are independent contractors who retain “full control” over several facets of their business.

The district court correctly recognized that the agreement favored independent-contractor

status. But the court apparently did not weigh this important component when reaching its

conclusion regarding independent-contractor status. Had the lower court given this express

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agreement proper consideration, it would have further swung the balance in favor of

independent-contractor status.

This court has time and again declared insurance agents to have independent-contractor

status—and appellees have presented no case in which we have not done so. See, e.g., Weary,

377 F.3d at 524; Wolcott v. Nationwide Mut. Ins. Co., 884 F.2d 245, 251 (6th Cir. 1989). Some

of our sister circuits have in fact already found American Family agents to be independent

contractors in other contexts. Wortham v. Am. Family Ins. Grp., 385 F.3d 1139, 1140–41 (8th

Cir. 2004); Moore v. Am. Family Mut. Ins. Co., No. 90-3107, 1991 U.S. App. LEXIS 13574, *3

(7th Cir. June 25, 1991). The plaintiffs have not shown that the facts here are so radically

different from these cases to justify what would be a significant departure from these rulings,

especially in the “legal context” of ERISA eligibility where we have held that “control and

supervision is less important” than the financial structure of the parties’ relationship. Ware, 67

F.3d at 578. Accordingly, we REVERSE and REMAND for further proceedings in accordance

with this holding.

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_________________

DISSENT

_________________

CLAY, Circuit Judge, dissenting. The only issue in this interlocutory appeal is whether

Plaintiffs are “employees” or “independent contractors” for purposes of the Employee

Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq. The majority

holds that Plaintiffs are independent contractors based on its analysis of the factors set forth by

Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318 (1992). However, because the majority

(1) adopts an incorrect standard of review for district court determinations regarding whether and

to what extent the Darden factors support employee or independent contractor status;

(2) incorrectly analyzes Darden factors one and eight; and (3) incorrectly weighs the Darden

factors, I respectfully dissent.

I. Background

American Family Insurance Company (hereinafter referred to as “American Family” or

“Defendants”) is an insurance company “whose business is selling insurance.” (RE 320, District

Court Opinion, PageID # 20949.)

Unsurprisingly, American Family’s insurance agents “are

core to [this] business.” (Id.) Over the last five years, American Family’s insurance agents have

brought in 85% of American Family’s insurance premiums—approximately $5.1 billion. Yet,

American Family does not provide its agents with numerous health, welfare, and retirement

benefits, including “a retirement plan, 401K plan, group health plan, group dental plan, group

life plan, and long-term disability plan.” (Id. at PageID # 20945.) American Family claims it is

not required to provide these benefits because it classifies its insurance agents as independent

contractors, not employees, relieving it of all ERISA obligations.

Plaintiffs represent a class of some 7,200 current and former American Family insurance

agents seeking ERISA benefits who challenge that classification. Plaintiffs argue that the

circumstances of their relationship with American Family demonstrate that they are employees,

Except as otherwise indicated, record citations refer to the record in district court action No. 13-cv-00437.

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regardless of what American Family chooses to call them. Accordingly, the district court

bifurcated this case to determine at the outset whether Plaintiffs are employees or independent

contractors for purposes of ERISA.

A twelve-day trial before an advisory jury ensued. Twenty-seven witnesses were called,

and extensive documentary evidence was submitted. At the conclusion of the trial, the advisory

jury unanimously concluded that Plaintiffs were employees. Though it was not bound by the

jury’s verdict, the district court reached the same conclusion.

In reaching that conclusion, the district court relied on the factors articulated in

Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318 (1992) for determining whether an individual

is an employee or an independent contractor. The Darden factors include:

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

hiring 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.

Id. at 323–24. This Court has also held that an express agreement between the parties is a

relevant factor. See Weary v. Cochran, 377 F.3d 522, 525 (6th Cir. 2004). The crux of this test

is “the hiring party’s right to control the manner and means by which the product is

accomplished.” Darden, 503 U.S. at 323.

Although the majority reaches a different conclusion than did the advisory jury and the

district court, it disagrees with only a few aspects of the district court’s analysis of the Darden

factors. Because I agree with the advisory jury and the district court, this dissenting opinion will

address only those Darden factors that the majority discusses. The district court’s well-reasoned

opinion speaks for itself as to the remaining Darden factors.

Before addressing the majority’s discussion of the Darden factors, a preliminary issue

must be resolved.

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II. Standard of Review and Legal Framework

As the majority explains, this case requires us to adopt a standard of review for district

court determinations regarding the existence and degree of the Darden factors—that is, whether

and to what extent each factor supports employee or independent contractor status. Plaintiffs

assert that these determinations are findings of fact typically reviewed for clear error, while

Defendants assert that they are conclusions of law typically reviewed de novo. The Sixth Circuit

has yet to explicitly address this issue, and our cases implicitly addressing this issue fail to

provide a clear answer. Compare Peno Trucking, Inc. v. Comm’r of Internal Revenue, 296 F.

App’x 449, 454–60 (6th Cir. 2008) (reviewing for clear error, without much discussion) with

Janette v. Am. Fidelity Grp., Ltd., 298 F. App’x 467, 472–76 (6th Cir. 2008) (reviewing de novo,

without much discussion). Accordingly, it might be helpful to consider cases from other circuits.

Four circuits have explicitly addressed this issue, and all four held that the existence and

degree of each Darden factor constitutes a finding of fact reviewed for clear error. See Berger

Transfer & Storage v. Cent. States Pension Fund, 85 F.3d 1374, 1377–78 (8th Cir. 1996); Dole

v. Snell, 875 F.2d 802, 805 (10th Cir. 1989); Brock v. Superior Care, Inc., 840 F.2d 1054, 1059

(2d Cir. 1988); Brock v. Mr. W Fireworks, Inc., 814 F.2d 1042, 1043–44 (5th Cir. 1987).

The Fifth Circuit’s reasoning in Mr. W Fireworks is particularly instructive. In that case,

the court explained that “[t]here are . . . three types of findings involved in determining whether

one is an employee within the meaning of the [Fair Labor Standards] Act.” 814 F.2d at 1044.

“First, there are historical findings of fact that underlie a finding as to one of [the factors].” Id.

These are undisputedly reviewed for clear error. “Second, there are those findings as to

[the factors] themselves.” Id. These findings are “plainly and simply based on inferences from

[the historical] facts and thus are [also] questions of fact that we may set aside only if clearly

erroneous.” Id. “Finally, the district court must reach an ultimate conclusion that the workers at

issue are ‘employees’ or ‘independent contractors’” Id. at 1045. This is undisputedly reviewed

de novo, as “[t]he ultimate finding as to employee status is not simply a factual inference drawn

Those cases that pre-date Darden address the same issue with regard to the Darden factors’ predecessor,

the Silk factors. See United States v. Silk, 331 U.S. 704 (1947), abrogated by Darden, 503 U.S. at 525.

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from historical facts [like the findings as to the factors themselves], but more accurately is a legal

conclusion based on factual inferences drawn from historical facts.” Id.

The reasoning of the Second, Fifth, Eighth, and Tenth Circuits is sound. “The existence

and degree of each [Darden] factor [are] question[s] of fact” because they are based on simple

inferences drawn from underlying historical findings of fact. Berger Transfer, 85 F.3d at 1377–

78. For instance, Darden factor five is “whether the hiring party has the right to assign

additional projects to the hired party.” Darden, 503 U.S. at 323–24. A finding that this factor

supports employee status is based on a simple inference from a finding that “the hiring party had

the right to assign additional projects to the hired party.” See Hi-Tech Video Prods., Inc. v.

Capital Cities/ABC, Inc., 58 F.3d 1093, 1096 (6th Cir. 1995). Thus, the two findings should both

be subject to the clear error standard of review.

The majority’s contrary holding—that “[e]ach Darden factor is . . . itself a ‘legal

standard’ that the district court is applying to the facts”—is belied not only by the unanimity of

other circuits that have addressed this issue, but also by the cases on which it purports to rely.

The majority’s reliance on my dissent in Weary v. Cochran, wherein I referred to Darden factor

one as a “legal issue,” is misplaced. 377 F.3d 522, 532 (6th Cir. 2004). Needless to say, it is the

majority opinion in Weary that binds this Court, including myself, no matter what is said in the

dissent.

See Johnson v. Doodson Ins. Brokerage, LLC, 793 F.3d 674, 677 (6th Cir. 2015). The

majority then cites Ware v. United States, in which this Court distinguished the “facts and

circumstances” of an employment relationship from “the legal meaning and weight that those

facts should be given.” 67 F.3d 574, 576 (6th Cir. 1995). But the “legal meaning” that the

Darden factors should be given—i.e., whether Plaintiffs are employees or independents

contractors for purposes of ERISA—and the “legal weight” that the Darden factors should be

given—i.e., which factors should be relied upon more than others and when—are both

undisputedly conclusions of law reviewed de novo. See Trs. of Resilient Floor Decorators Ins.

Fund v. A&M Installations, Inc., 395 F.3d 244, 249 (6th Cir. 2005); Hi-Tech Video Prods., Inc.

The majority cites various portions of my dissent in Weary a total of five times throughout its opinion.

Such cherry-picking does nothing to increase the persuasiveness of the majority’s reasoning, particularly to the

extent that my dissent is at odds with controlling case law and the subsequent published decisions of this Court.

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v. Capital Cities/ABC, Inc., 58 F.3d 1093, 1096 (6th Cir. 1995). Thus, the majority’s reliance

upon Ware misses the point. That case says nothing about the existence and degree of each

Darden factor, a distinct, factual determination that should be reviewed for clear error.

The procedural posture of this case may help explain the difficulty with the majority’s

reasoning. Because this is an interlocutory appeal, we “have no authority to review the district

court’s findings of fact.” Northwestern Ohio Adm’rs, Inc. v. Walcher & Fox, Inc., 270 F.3d

1018, 1023 (6th Cir. 2001). Consequently, a holding that the district court’s determinations

regarding the existence and degree of each Darden factor are findings of fact to be reviewed for

clear error would, in this case, preclude any review of such determinations, and diminish the

majority’s ability to reverse a decision that the majority believes goes against the weight of

authority.

III. Analysis of Darden Factors One and Eight

Even assuming arguendo that district court determinations regarding the existence and

degree of each Darden factor constitute applications of law to fact that we have authority to

review in this case, the majority incorrectly analyzes Darden factors one and eight, the only two

factors on which the majority disagrees with the district court’s analysis.

Darden factor one is “the skill required”—here, of an insurance agent. Darden, 503 U.S.

at 323–24. And “the sale of insurance is a ‘highly specialized field,’ requiring considerable

‘training,’ ‘education,’ and ‘skill.’” Weary, 377 F.3d at 527 (quotation omitted). However, that

is not the end of the inquiry. Because “‘skills are not the monopoly of independent

contractors’ . . . [i]t is also important to ask how the worker acquired his skill.” Keller v. Miri

Microsystems, LLC, 781 F.3d 799, 809 (6th Cir. 2015) (quoting Sec’y of Labor v. Laurtizen,

835 F.2d 1529, 1537 (6th Cir. 1987)).

“[If] the company provides all workers with the skills

necessary to perform the job, then that weighs in favor of finding that the worker is

indistinguishable from an employee.” Id. Accordingly, in Keller, this Court held that there was

The Seventh Circuit has also recognized the importance of this question. See Equal Emp’t Opportunity

Comm’n v. N. Knox Sch. Corp., 154 F.3d 744, 747 (7th Cir. 1998) (explaining that the Seventh Circuit’s Knight

factors, in which the Darden factors are “subsumed,” include “the kind of occupation and nature of skill required,

including whether skills are obtained in the workplace”) (emphasis added).

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a genuine issue of material fact regarding the skill required of the plaintiff because “[the

defendant] provided [the plaintiff] with the critical training necessary to do the work.” Id.

It is undisputed that the same is true in this case. The district court found that

“[Defendants] almost always hired untrained, and often unlicensed, agents and provided all the

training they needed to be an American Family agent.” (RE 320, PageID # 20972.) In fact, they

“preferred to hire untrained agents so that they could be trained in the ‘American Family’ way.”

(Id. at PageID # 20972–73.) And “[i]f an agent had worked for a different company prior to

being hired at American Family, they were re-trained in the ways of American Family agents

upon hire.” (Id. at PageID # 20973–74.) Thus, because “the company provide[d] all workers

with the skills necessary to perform the job,” the district court was correct in its determination

that Darden factor one supports the status of Plaintiffs as employees. Keller, 781 F.3d at 809.

The majority’s contrary holding—that “this factor [weighs] in favor of independent

contractor status”—is again undermined by the cases on which it purports to rely. The majority

reasons that “[t]he first factor under Darden looks to ‘whether the skill is an independent

discipline (or profession) that is separate from the business and could be (or was) learned

elsewhere,’” and that the skill of an insurance agent “could be” learned elsewhere, but in doing

so relies solely on the dissent in Weary.

And the dissent in Weary glaringly conflicts with this

Court’s subsequent decision in Keller, in which this Court clearly stated that “[if] the company

provides all workers with the skills necessary to perform the job,” Darden factor one supports

employee status. Keller, 781 F.3d at 809. Whether those skills could have been learned

elsewhere is irrelevant, and the majority’s holding to the contrary flies in the face of binding

precedent.

Darden factor eight is “the hired party’s role in hiring and paying assistants.” Darden,

503 U.S. at 323–24. The greater the role that the hired party plays, the more this factor supports

The majority also cites this Court’s unpublished decision in Janette, which quoted the same passage from

the dissent in Weary. However, this Court in Janette cited that passage as though it were from the majority in

Weary, failing to indicate “(Clay, J., dissenting)” after its pincite. See 298 F. App’x at 474. Thus, it is possible if

not likely that this Court in Janette mistakenly believed it was quoting binding precedent as opposed to a non-

binding dissent. Regardless, Janette itself is an unpublished and therefore non-binding decision. See United States

v. Yates, 886 F.3d 723, 728 (6th Cir. 2017).

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independent contractor status, and the greater the role that the hiring party plays, the more this

factor supports employee status. Weary, 377 F.3d at 527.

In this case, the district court found that Plaintiffs “ha[d] primary authority to hire and

fire their staff,” but not “sole discretion” in doing so, and that they “ha[d] sole discretion in staff

compensation matters.” (RE 320, PageID # 20979.) Specifically, the district court found that

Defendants played a role in hiring and firing Plaintiffs’ staff (1) by “impos[ing] qualifications”

on them, “including licensure, clean driving records, education levels, credit history, and

minimum income to debt ratios;” (2) by requiring Plaintiffs’ staff “to agree to a life-time non-

solicitation agreement;” and (3) by “retain[ing] some authority to approve or disapprove

of . . . agency staff selections, above and beyond the imposition of [these] qualification

requirements.” (Id.) This role included the ability of Defendants, without the consent of

Plaintiffs, to “fire any agency staff . . . who did not live up to the American Family Code of

Conduct.” (Id.) Based on these facts, the district court determined Darden factor eight to be

“neutral.” (Id. at PageID # 20980.) I believe that Darden factor eight actually supports the

status of Plaintiffs as employees.

The majority’s contrary holding, that the district court necessarily should have

determined that Darden factor eight supported independent contractor status because it found

that Plaintiffs had “primary authority” over hiring and paying assistants, notably lacks any

supporting authority. The majority cites only this Court’s unpublished decision in Janette, in

which this Court rejected the plaintiff’s argument that she had “no hiring authority” because she

“could have hired assistants.” 298 F. App’x at 475. No role of the defendant in hiring and

paying the plaintiff’s assistants was discussed in that case, and it is thus inapposite.

The majority seems to ultimately rest its argument on its reading of the phrase “primary

authority.” But “primary” does not necessarily mean more than anyone else; rather, it also

means first in time. See, e.g., Primary, Oxford English Dictionary, http://www.oed.com/ (last

visited December 21, 2018) (“Occurring or existing first in a sequence of events . . . .”); Primary,

Merriam-Webster Dictionary, http://www.merriam-webster.com/ (last visited December 21,

2018) (“[F]irst in order of time or development.”). And such usage by the district court when it

found that Plaintiffs had “primary authority over hiring and paying assistants” would be entirely

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consistent with the facts of this case, because Defendants retained “some authority to approve or

disapprove” or to “override” an agent’s staff selections after they had been made. (RE 320,

PageID # 20979–80.)

IV. Weight to be Afforded the Darden Factors

As previously discussed, “the crux of the Darden common law agency test is the hiring

party’s right to control the manner and means by which the product is accomplished.” Weary,

377 F.3d at 525. Accordingly, “this Court has repeatedly held that the employer’s ability to

control job performance and the employment opportunities of the aggrieved individual are the

most important of the many factors to be considered.” Marie v. Am. Red Cross, 771 F.3d 344,

357 (6th Cir. 2014). In contrast, contractual labels assigned by the parties, while “certainly

relevant,” Weary, 377 F.3d at 525, are less important. See, e.g., Keller, 781 F.3d at 804

(“[W]e must look to see whether a worker, even when labeled as an ‘independent contractor,’ is,

as a matter of ‘economic reality,’ an employee.”); Solis v. Laurelbrook Sanitarium & Sch., Inc.,

642 F.3d 518, 522 (6th Cir. 2011) (“Whether an employment relationship exists under a given set

of circumstances is not fixed by labels that parties may attach to their relationship . . . .”).

Recognizing this hierarchy of the Darden factors, the district court found that

“[Defendants] and [their] agents entered into Agent Agreements . . . indicat[ing] that the parties

intended for [the] agents to be treated as independent contractors.” (RE 320, PageID # 20971–

72.) However, the district court also found that “[o]ther internal documents . . . indicate that

[Defendants] expected [their] sales managers to exercise control over agents’ methods and

manner of performing their services.” (Id. at PageID # 20972.) For instance, “[Defendants’]

training manuals actually refer to agents as ‘employees.’” (Id. at PageID # 20983.) The district

court then analyzed the remaining Darden factors, and determined that they were “almost evenly

split between favoring employee status and favoring independent contractor status.” (Id.). As a

result, the district court turned back to “the most important of the many factors to be

considered”—“[t]he employer’s ability to control job performance and the employment

opportunities of the aggrieved individual.” (Id. at PageID # 20982.) (quoting Marie, 771 F.3d at

357).

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The district court listed the numerous ways in which Defendants had the ability to control

and did control Plaintiffs’ job performance and employment opportunities. These include, but

are not limited to, the following: (1) Plaintiffs did not own a book of business; (2) Plaintiffs did

not own any policies; (3) Defendants unilaterally reassigned policies brought in by one agent to

others; (4) Defendants could require Plaintiffs to service policies that they did not initiate,

without any compensation; (5) Defendants did not allow Plaintiffs to sell insurance from other

companies not financially connected to Defendants; (6) Defendants actively discouraged and in

some cases prohibited Plaintiffs from taking on other employment, even if it was unrelated to

insurances sales; (7) Defendants required Plaintiffs to sign a one-year non-compete agreement,

and required Plaintiffs’ staff to sign a lifetime non-compete agreement; and (8) Defendants

trained their sales managers to believe they were Plaintiffs’ bosses and had the authority to

demand Plaintiffs’ compliance—a belief which many acted upon. On these facts, and in

accordance with this analysis, I agree with the district court that Plaintiffs are employees for

purposes of ERISA.

The majority’s holding to the contrary—that Plaintiffs are independent contractors for

purposes of ERISA—is again undermined by the cases on which it purports to rely. The

majority first reasons that “[b]ecause ERISA cases focus on the financial benefits that a company

should have provided . . . the Darden factors that most pertain to financial structure . . . carry

more weight,” as opposed to the employer’s ability to control job performance and the

employment opportunities of the aggrieved individual. But in doing so, the majority relies solely

on this Court’s decision in Ware, in which this Court stated that “the relative weight given each

[Darden] factor may differ depending upon the legal context of the determination.” 67 F.3d at

578. This Court in Ware then elaborated that the traditionally important control factors are

“more relevant in the context of copyright ownership.” Id. While it also noted that the reverse

may be true in the ERISA context—that the traditionally important control factors may be “less

important,” id.—such speculation was merely dicta, as Ware exclusively concerned employment

status in the copyright ownership context, and had nothing to do with ERISA. See United States

v. Hardin, 539 F.3d 404, 411 (6th Cir. 2008) (holding that language in a prior decision was dicta

because it “was not necessary to the determination of the issue on appeal”). And “one panel of

this [C]ourt is not bound by dicta in a previously published panel opinion.” United States v.

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Burroughs, 5 F.3d 192, 194 (6th Cir. 1993). Moreover, this characterization of the speculation

about ERISA in Ware is further supported by this Court’s decision in Simpson v. Ernst & Young,

an ERISA case decided the year after Ware, in which this Court reaffirmed “the employer’s

ability to control job performance and employment opportunities of the aggrieved individual as

the most important of many elements to be evaluated” when determining that individual’s

employment status. 100 F.3d 436, 442 (6th Cir. 1996).

The majority also reasons that the district court “should have considered the parties’

express agreement to be of greater force.” As briefly discussed above, this reasoning is

unpersuasive because the district court properly considered the Agent Agreements as relevant but

not dispositive evidence of independent contractor status. No greater consideration was

warranted, particularly given that the language in the Agent Agreements is contradicted by

language in other internal documents, including Defendants’ training manuals, and that

contractual labels are particularly susceptible to manipulation such that over-reliance on them

would “defeat the purpose” of ERISA. Shah v. Racetrac Petroleum Co., 338 F.3d 557, 575 (6th

Cir. 2003); see also Commodity Futures Trading Com’n v. Erskine, 512 F.3d 309, 318 (6th Cir.

2008).

For all of the foregoing reasons, I respectfully dissent.