Declaration of Independence

Erin Beaumont-Jacques, a former district manager for the Farmers Group of Cos., filed a lawsuit in 2010 against Farmers for damages, claiming several causes of action for breach of contract, breach of the implied covenant, sex discrimination and business and professions code violations.

After discovery, Farmers moved for summary judgment, which was granted in entirety, finding Beaumont-Jacques to be an independent contractor, not an employee.

Beaumont-Jacques appealed, challenging the trial court's granting of a Farmers Group motion for summary judgment. She claimed the trial court erred in concluding as a matter of law that she was an independent contractor and that she presented no triable issues of fact regarding her causes of action. In Beaumont-Jacques v. Farmers Group Inc., B239855 (Cal.App. Dist.2 06/12/2013), the California Court of Appeals was asked to resolve the dispute.

Related: Read “Brother Act“

Case history

After several years working for Farmers Group, Beaumont-Jacques in September 2005 became one of Farmers' district managers by executing the district manager appointment agreement (DMAA). Beaumont-Jacques thereafter recruited and recommended persons to become agents solely for the Farmers Group of Cos. If Farmers accepted such a person, Beaumont-Jacques trained and motivated that agent to market the Farmers Group's insurance products only. While she herself did not sell those products, Beaumont-Jacques could represent Farmers, but no other insurers, and was paid a proportion of the earnings of the agents she recruited and managed.

According to Beaumont-Jacques, she received many accolades from Farmers. In October 2009, she voluntarily terminated this relationship, receiving, in two payments, $196,085.20 from the Farmers Group pursuant to the DMAA.

Among other things, the DMAA addresses certain subjects, which form the contractual framework for the dispute. Paragraph H states:

Nothing contained herein is intended or shall be construed to create a relationship of employer and employee. The time to be expended by District Manager is solely within his/her discretion, and the persons to be solicited and the area within the district involved wherein solicitation shall be conducted is at the election of the District Manager. No control is to be exercised by the Companies over the time when, the place where, or the manner in which the District Manager shall operate in carrying out the objectives of this Agreement provided only that they conform to normal business practice and to applicable law. 

Beaumont-Jacques testified at her deposition, personally destroying her case, that when she signed the DMAA, she understood she was an independent contractor and so did the Farmers Group.

According to paragraph B.1 of the DMAA, Beaumont-Jacques will “recruit for appointment and train as many agents acceptable” to the Farmers Group. Beaumont-Jacques received commission “overwrites” based upon the sales subsequently produced by those agents, with Respondents overseeing the amount of such compensation. In connection with those and related efforts, the DMAA prescribed that the signatory defendants could establish “goals and objectives” with respect to the sales of their products. Beaumont-Jacques was required to conform to Respondents' “regulations, operating principles and standards” and engage in “normal good business practice.”

The issue presented to the court of appeal was whether the trial court was correct in determining, as a matter of law, that Beaumont-Jacques was an independent contractor? If so, were all of her claims properly dismissed by that court?

Related: Read “Pants on Fire“

Analysis

The pivotal inquiry when determining whether a person is an independent contractor or an employee looks at the “control of details”: i.e., whether the principal has the right to control the manner and means of accomplishing the result desired. Some cases state the principal's control must be “complete” in order to find an employer/employee relationship. Other cases state the principal must have “complete” or “authoritative” control to find such a relationship. In any event, the key is the right to control, rather than the amount of control which was exercised. Several decisions focus upon the principle that a principal may oversee the results, but not the means, of the work in question.

Related: Read “Agree to Disagree“

Undisputed evidence established that Beaumont-Jacques exercised meaningful discretion by: recruiting, training and motivating agents to sell Farmers Group insurance; determining her own day-to-day hours, including her vacations; on most days, fixing the time for her arrival and departure at her office and elsewhere, including lunch and breaks; preparing reports for and attending meetings of the Farmers Group; hiring and supervising her staff, i.e., those who worked at her office, while remitting payroll taxes for them as employees; performing other administrative tasks, including resolving problems; paying for her costs such as marketing, office lease, telephone service and office supplies; deducting those costs as a business expense in her personal tax returns; and identifying herself as self-employed in those returns. Lastly, the DMAA specifically provided there was no employer/employee relationship.

Beaumont-Jacques emphasizes the “New District Manager Minimum Acceptable Performance Standards”(the performance standards). This document ends with these words: “These requirements do not in any way amend or modify your District Manager's Appointment Agreement or your status as an independent contractor. Keep in mind we view the above criteria as minimum levels of performance. You should develop plans to exceed these minimum performance standards.”

However, the document says nothing about the manner in which the Farmers Group wanted or expected Beaumont-Jacques to comply with these minimum performance standards, or the manner in which she should satisfy them.

This document is a classic example of setting results while leaving the means to achieve them to Beaumont-Jacques.

The relevant factors and applicable case law led the court of appeals to the conclusion that the trial court properly ruled, as a matter of law, that Beaumont-Jacques was an independent contractor.

Because of this conclusion, it was not appropriate nor necessary for the court of appeals to analyze further. Beaumont-Jacques was not an employee; all of her causes of action are not viable as a matter of law. Her first two causes of action are breach of contract and breach of the implied covenant; premised upon the -allegation of an employer/employee relationship. These claims cannot succeed as Beaumont-Jacques was an independent contractor.

Unless you are willing to operate your own business as an entrepreneur, do not sign an agreement like the district manager agreement signed by Beaumont-Jacques. She wanted the income of a district manager whose earnings were based on the work of others recruited by her, the protections of the workers' compensation laws, the right to overtime and all the other protections provided by the state to those who are employees.

Before signing such an agreement, ask your personal attorney to explain the terms, limitations and costs required by the contract and, if you are an independent contractor as was the appellant, your rights and obligations to the principal.