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NLRB v. United Ins. Co.

Supreme Court of the United States

January 23-24, 1968, Argued ; March 6, 1968, Decided 1

No. 178


 [*255]   [****3]   [***1085]   [**989]  MR. JUSTICE BLACK delivered the opinion of the Court.

In its insurance operations respondent United Insurance Company uses "debit agents" whose primary functions are collecting premiums from policyholders, preventing the lapsing of policies, and selling such new insurance as time allows.  The Insurance Workers International Union, having won a certification election, seeks to represent the debit agents, and the  [***1086]  question before us is whether these agents are "employees" who are protected by the National Labor Relations Act or "independent contractors" who are expressly exempted from the Act. 2 Respondent company refused to recognize the Union, claiming that its debit agents were independent contractors rather than employees.  In the ensuing unfair labor practice proceeding the National Labor Relations Board held that these agents were employees and ordered the company to bargain collectively with the Union. 154 N. L. R. B. 38. On appeal the Court of Appeals found that the debit agents were independent contractors and refused to enforce the Board's order. 371 F.2d 316 (C. A. 7th Cir.). The importance of the question [****4]  in the context involved to the administration of the  [*256]  National Labor Relations Act prompted us to grant the petitions of the Board and the Union for certiorari. 389 U.S. 815.

 At the outset the critical issue is what standard or standards should be applied in differentiating "employee" from "independent contractor" as those terms are used in the Act. Initially this Court held in NLRB v. Hearst Publications, 322 U.S. 111, that "Whether . . . the term 'employee' includes [particular] workers . . . must be answered primarily from the [****5]  history, terms and purposes of the legislation." 322 U.S., at 124. Thus the standard was one of economic and policy considerations within the labor field. Congressional reaction to this construction of the Act was adverse and Congress passed an amendment specifically excluding "any individual having the status of an independent contractor" from the definition of "employee" contained in § 2 (3) of the Act. ] The obvious purpose of this amendment was to have the Board and the courts apply general agency principles in distinguishing between employees and independent  [**990]  contractors under the Act. 3 And both petitioners and respondents agree that the proper standard here is the law of agency.  Thus there is no doubt that we should apply the common-law agency test here in distinguishing an employee from an independent contractor.

 [****6]  Since agency principles are to be applied, some factual background showing the relationship between the debit agents and respondent company is necessary. These basic facts are stated in the Board's opinion and will be very briefly summarized here. Respondent has district offices in most States which are run by a manager who usually has several assistant managers under him.  [*257]  Each assistant manager has a staff of four or five debit agents, and the total number of such agents connected with respondent company is approximately 3,300. New agents are hired by district managers, after interviews; they need have no prior experience and are assigned to a district office under the supervision of an assistant district manager. Once he is hired, a  [***1087]  debit agent is issued a debit book which contains the names and addresses of the company's existing policyholders in a relatively concentrated geographic area. This book is company property and must be returned to the company upon termination of the agent's service. The main job of the debit agents is to collect premiums from the policyholders listed in this book. They also try to prevent the lapsing of policies and sell [****7]  new insurance when time allows. The company compensates the agents as agreed to in the "Agent's Commission Plan" under which the agent retains 20% of his weekly premium collections on industrial insurance and 10% from holders of ordinary life, and 50% of the first year's premiums on new ordinary life insurance sold by him. The company plan also provides for bonuses and other fringe benefits for the debit agents, including a vacation-with-pay plan and participation in a group insurance and profit-sharing plan. At the beginning of an agent's service an assistant district manager accompanies the new agent on his rounds to acquaint him with his customers and show him the approved collection and selling techniques.  The agent is also supplied with a company "Rate Book," which the agent is expected to follow, containing detailed instructions on how to perform many of his duties. An agent must turn in his collected premiums to the district office once a week and also file a weekly report. At this time the agent usually attends staff meetings for the discussion of the latest company sales techniques, company directives, etc. Complaints against an agent are investigated  [*258]   [****8]  by the manager or assistant manager, and, if well founded, the manager talks with the agent to "set him straight." Agents who have poor production records, or who fail to maintain their accounts properly or to follow company rules, are "cautioned." The district manager submits a weekly report to the home office, specifying, among other things, the agents whose records are below average; the amounts of their debits; their collection percentages, arrears, and production; and what action the district manager has taken to remedy the production "letdown." If improvement does not follow, the company asks such agents to "resign," or exercises its rights under the "Agent's Commission Plan" to fire them "at any time."

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390 U.S. 254 *; 88 S. Ct. 988 **; 19 L. Ed. 2d 1083 ***; 1968 U.S. LEXIS 3014 ****; 57 Lab. Cas. (CCH) P12,520; 67 L.R.R.M. 2649



Disposition:  371 F.2d 316, reversed.


debit, contractor, premiums

Labor & Employment Law, Employment Relationships, At Will Employment, Definition of Employees, Collective Bargaining & Labor Relations, Unfair Labor Practices, General Overview, Business & Corporate Compliance, Discrimination, Age Discrimination, Federal & State Interrelationships, Independent Contractors, Business & Corporate Law, Agency Relationships, Types, General Agents, Agents Distinguished, Independent Contractors, Masters & Servants, Administrative Law, Judicial Review, Standards of Review