Golden State Agency, Inc.

National Labor Relations Board - Board Decisions

Dec 31, 1952

101 N.L.R.B. 1775 (N.L.R.B. 1952)

GOLDEN STATE AGENCY, INC. 1775
neers, administrative, executive , and professional personnel , time=;
keepers, storekeepers , janitors, watchmen, foremen , guards, and all
supervisors as defined in the Act.
[Text of Direction. of Election omitted from publication in this
volume.]
GOLDEN STATE AGENCY, INC., STATE FARM MUTUAL AUTOMOBILE INSUR-
ANCE COMPANY, STATE FARM FIRE AND CASUALTY COMPANY AND
STATE FARM LIFE INSURANCE COMPANY and INSURANCE AND ALLIED
WORKERS ORGANIZING COMMITTEE, CIO, PETITIONER. Case No. 20-
RC 1622. December 31,1952
Amended Decision and Direction of Election
On March 20, 1952, the Board issued its Decision and Order in the
above-entitled case 1 finding that the insurance agents sought by the
Petitioner were independent contractors and dismissing the petition.
On April 29, 1952, the -Petitioner filed a motion to reopen the hearing
for the purpose of taking certain additional evidence relevant to the
status of the insurance agents. On May 14, 1952, the Employers filed
a memorandum in opposition thereto. On May 23, 1952, the Board
issued an Order granting the Petitioner's motion to reopen the record
subject to the right of the Employers to adduce additional evidence
bearing on the issue, and remanded the case to the Regional Director
for further hearing.
Pursuant to the Board's Order, a hearing was held before Jerome H.
Brooks, hearing officer. The hearing officer's rulings made at the hear-
ing are free from prejudicial error and are hereby affirmed.
Upon reconsideration of this case, and upon the entire record herein,
the Board makes the following findings of fact : 2
1. The Employers are engaged in commerce within the meaning of
the Act.
2. The labor organization involved claims to represent certain em-
ployees of the Employers.
3. The Petitioner seeks a unit of all insurance agents appointed by
and acting for the Employers in the State of California. The Em-
ployers contend that the agents sought are independent contractors.
The Employers write life, fire and casualty, and automobile insur-
ance in the United States and Canada. The California operations
involved herein are under the over-all supervision of a State director
s As the entire record-and briefs adequately present the issues and the positions of the.
parties; the Employers '::retiaestfoii.,rAl argument is hereby denied.
101 NLRB No. 247.
1776 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
who has under him managers in each of the State districts. - By agree-
ment with the Employers, each district manager is paid a commission
on business written by the local agents who, in the language of the
agreement, are "under his supervision and control." 3 A district man-
ager spends his working time as follows 15 percent recruiting new
agents, 15 percent training new agents, 15 to 20 percent helping agents
close deals, and the balance answering questions of agents, checking
their reports, and generally supervising them. In recruiting local.
agents, the district manager investigates their character and financial
standing, and recommel ids their appointment to the ' State director,
who signs the contracts of appointment subject to the approval of
the home office of the Employers. New agents receive training man-
uals on the basis of which they as well as regular agents are examined
as to proficiency. The manuals are described as-
First, a training course for the new agent, and secondly, a con-
tinuing reference service for the established agent . . . Since this
course sets forth and applies the fundamental knowledge, attitude,
habits, and skills which are necessary for successful agency opera-
tion, we insist that your manager require satisfactory completion
of it . . . The text is divided into sections which constitute study
units. Following each section is a series of questions or projects,
which must be completed and forwarded to your manager for
correction or comment, or conference.
The text of the automobile manual treats of such matters as under-
writing aids, criteria for automobile insurance, corresponding with
the Employer, and submitting application and premium. The Em-
ployers advance funds to new agents if necessary until business de-
velops and commissions earned offset the funds advanced. Approxi-
mately 408, local agents, only a few of whom do not represent all the
Employers, write and service the Employers' insurance policies.
An agent's contract of appointment is nonassignable and may be
terminated at will either by the agent or by the district manager
whose action is subject to approval by the State director and the home
office of the Employers. Upon termination of an agent's contract, 4h
accounts standing to his credit are transferred to other agents, and
he is required to refrain from soliciting policyholders and to turn
over to the Employers all records and materials which remain em-,
ployer property. A terminated agent may not use his life insurance
license 4 under State law until he obtains an appointment with another
life insurance company. Except that commissions on policies already
s The parties stipulated, and we find, that the district managers are supervisors within
the meaning of the Act.
4 Under State law, the agents pay the license fees for automobile , fire, and casualty
Insurance and the Employer pays the license fee for life insurance.
GOLDEN STATE AGENCY, INC. 1777
written may not be changed, the Employers may unilaterally make
any change in an agent's contract by announcing such change in
advance in the Employers' publication.
An agent's remuneration is set by the Employers on a uniform basis
and is not the subject of "bargaining" upon hire or at any other time.
Agents do not receive a minimum salary or guarantee but are com-
pensated on a commission, service fee, and bonus basis. In addition
to service fees, automobile insurance agents receive a percentage of
the policyholder's membership fee. In general, commissions, service
fees, and bonus are based either upon a percentage of premiums col-
lected or the amount of qualifying insurance in force over a period
of time 5
The automobile and life insurance contracts of appointments specify
that the duties of agents are to solicit and secure applications for
insurance on a "quality basis" in accordance with the Employers'
rules; to deliver policies; to secure membership fees, initial premiums,
and applications for reinstatement of insurance; to use their "best
effort" to keep in force existing policies; to service the policyholders;
to make reports as required; to attend agents' meetings; to investigate
and handle claims "under the direction of the Company"; and to
represent no other casualty or life insurance company without the
written consent of the Employers. The contracts further provide
that-
The authority of the Local Agent shall extend no further than
as stated in this appointment, and the Local Agent does not have
the authority to extend the time for payment of any premium
on any policy issued by the Company or waive or forfeit any of
the Company's rights or requirements with respect to any such
policy of insurance.
No policy may be finally concluded, amended, or claims paid there-
under without approval of the home office though automobile, fire,
and casualty insurance may be temporarily placed in effect upon the
issuance of a binder by the agent.
Policy application forms furnished by the Employers reveal that
agents' are required to obtain information from applicants covering
in detail all aspects of the risk sought to be insured. The notice-of-
loss form used in fire and casualty insurance instructs agents not to'
commit the Employer to any claim unless specifically authorized to
do so. Agents are also told to be "extremely cautious" in their acts
and speech on all points, and to enter into no appraisal agreement
and accept no abandonment of property under any circumstances. A
5 The evidence is conflicting as to whether upon- termination an agent loses remuneration
arising out of business written and serviced over the preceding 6 months. We do not'
regard resolution of this matter as critical herein.
1778 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
form used in making an inventory of the contents of a home spells
out in detail exactly the information the agents are to secure. Similar
detailed forms deal with automobile claim, change of insurance cov-
erage, and notice of insurance lapse. Agents are furnished receipts
to be given as trustees when money is collected in behalf of the Em-
ployers. The life insurance agents' ratebook 6 contains specific in-
structions on the authority of an agent, the information sought in
applications, naming the beneficiary, nonmedical applications, mode
of premium payment, annuities, agent's statement on applications,
inspection report, nomination of medical examiner, when a policy is
in force, delivery of the policy, settlement of the initial premium,
conditional binding receipt, lapse or conversion of other insurance,
application denied or postponed, and ordering additional and alter-
nate policies.
In 1951, permission was granted agents on 52 occasions to represent
other insurance carriers. Insurance which the agents place with other
companies for the most part involves risks which the Employers will
not undertake, such as rural fire insurance, or do not write, such as
workmen's compensation. It appears that only an insignificant
amount of insurance in lines covered by the Employers is placed
with competing carriers.
Approximately 10 percent of all agents occupy offices jointly with
district managers. The balance of the agents work out of their homes
or maintain offices alone or with other agents. Office expenses includ-
ing rent, equipment, private telephone, and clerical help are shared
with other agents or with the district manager in a jointly occupied
office 7 The Employers furnish throwaway cards at reduced cost, ad-
vertising pamphlets, official forms, instruction books and ratebooks,
return envelopes, and a part of advertising costs in local newspapers.
All publicity by the agents must be approved by the Employers, who
supply the advertising mats.
There is no requirement that agents hire office clericals nor are such
clericals under the direction or control of the Employers. Agents
who require clerical assistance hire their own office employees, fix their
remuneration, terms of employment, and job duties. These agents
withhold income tax and pay social security and unemployment insur-
ance taxes covering their office employees, which the agents forward
to the Employers only for transmission to the State and Federal
authorities. Approximately 50 percent of the agents have office
clericals in their employ.
There are similar ratebooks covering the other types of insurance.
' It appears that the district managers hold the lease to those premises which they occupy
jointly with the agents and that the agents pay the district managers a pro rata share of
the rent and other expenses. -
GOLDEN STATE AGENCY, INC. 1779
Agents seek business anywhere in the State, set their own working
schedules and vacations and, with few exceptions, devote 8 or more
hours per day to business of the Employers. A few agents engage in
a second activity, such as selling real estate, teaching, or being mayor
of a small community. They are able to carry on both activities
because the second requires only part time or is, in fact, conducted by
persons hired by the agent for that purpose.8 The business cards and
envelopes of the agents as well as the door fronts of district offices
indicate that the agents represent the Employers, without mention of
other firms or pursuits.9
Agents fix individual sales quotas after discussion with the district
manager whose agreement with the Employers specifies a minimum
annual quota of new insurance for the district. While the evidence is
conflicting as to whether agents are discharged for failing to meet
their quotas, it is clear that considerable pressure to fulfill quotas is
exerted by the district managers and the State and home offices of the
Employers by having agents participate in contests in which they may
win bonuses, trips, or various awards, and by regular publication of
the results of competitive production drives in national, State, and
district bulletins. District bulletins in particular emphasize quotas
and list agents with production credit standings, singling out special
achievements for praise and calling attention to lagging quotas.
Agents with outstanding production records are afforded university
courses in life insurance at employer expense.
Agents maintain record cards on policyholders and activity reports
in addition to the records required by State law. Copies of activity
reports kept on a weekly basis are submitted to the district manager
and the State office at least once a month on official forms, a prerequisite
to receiving service fees. These forms require a tabulation of calls,
interviews, prospects, leads, sales, claims, applications, reinstatements,
amount of annual premium and mode of payment, and time spent.
The activity forms officially define "call," "interview," "prospect," and
"leads." Attendance at district managers' meetings held at least once
a month is stressed and new agents in particular are expected to attend.
The Employers withhold agents' income tax, pay social security and
unemployment insurance taxes covering them, and provide a jointly
financed obligatory agents' retirement plan, There is also available
to qualified agents an employer group surgical and hospitalization
plan. The Employers do not carry workmen's compensation insurance
for the agents nor do the Employers require that the agents secure
liability insurance on their automobiles or their offices or post a bond.
' This arrangement is facilitated by employment of a solicitor licensed under State
law to sell insurance . The solicitor is commonly a member of the agent's family.
' Only one of several cards and envelopes of the agents in evidence indicates another
field of endeavor.
1780 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
The determination of whether an individual is an independent
contractor or an employee under the Act requires the application of
the common law "right of control" test. Under this test, an em-
ployer-employee relationship exists where the person for whom the
services are performed reserves the right to control not only the end
to be achieved but also the manner and means to be used in reaching
such end. The resolution of this question depends on the facts of
each case and no one factor is determinative.10
The complete record now before us establishes that the agents are
employees of the Employers rather than independent contractors.
We are mindful that some agents find it practicable to hire clerical
employees, rent office space and supply equipment, and that all agents
arrange their working time to suit themselves and are free to solicit
anywhere in the State. However, these circumstances indicating
an independent-contractor relationship must be evaluated in the
face of countervailing evidence of the extent to which the Em-
ployers control the activities of their agents.11 By the express terms
of the agents' contracts of appointment, the Employers reserve the
right to prescribe the manner and means by which' insurance policies
are sold and serviced, and this purpose is accomplished in operation
by subjecting agents to the control of the Employers in the details
of performing their functions. Thus, agents are under the super-
vision and control of the district managers; are governed in the
selling and servicing of insurance by the instructions they receive in
employer manuals and underwriting aids; are required to submit
official forms covering all business transactions as well as regular
detailed reports on their activities; are urged to attend monthly dis-
trict managers' meetings and expected to do so while they are new
agents; and may take no final action without home office approval.
The employer-employee relationship is further indicated by the
right of the Employers unilaterally to determine the agents' compen-
sation and other terms of employment as well as summarily to end
the relationship without subjecting themselves to liability. Also,
the inability of life insurance agents to solicit if terminated by the
Employers until they obtain new employment, and the requirement
that all terminated agents refrain from soliciting the Employers'
policyholders and return all records and materials to the Employers,
support the conclusion that the agents are employees. Further-
more, the emphasis placed upon the fulfillment of sales quotas and
the various incentives designed to pressure the agents into achieving
10 See Oklahoma Trailer Convoy, Inc., 99 NLRB 1019 ; Citizen News Company , Inc., 97
NLRB 428.
11 Cf. San Marcos Telephone Company, 81 NLRB 314.
GOLDEN STATE AGENCY, INC. 17$1
the Employers' production goals establish that the agents are sales-
men whose output is constantly subject to the dictates of the Em-
ployers. Moreover, agents are not free to place insurance with
competing carriers even if it would be to their advantage for, with
few exceptions, the insurance written by agents in lines covered by
the Employers must be for the account of the Employers. Agents
generally devote full time to the work of the Employers, hold them-
selves out to the public as representatives of the Employers only, and
may not advertise without employer permission and dictation of the
format used. The recruiting, financing, and training of new agents,
the course in life insurance available to experienced agents, and the
social security and retirement plan all point to the Employers'
purpose to develop and maintain a skilled, permanent body of em-
ployees. Finally, it is clear that the activities of the agents con-
stitute an integral part of the Employers' business without which the
Employers could not function.
In view of the foregoing, and upon the entire record herein, we
find, contrary to the Employers' contention, that the insurance agents
constitute employees within the meaning of Section 2 (3) of the Act: 2
We therefore find that a question affecting commerce exists concern-
ing the representation of employees of the Employer within the mean-
ing of Section 9 (c) (1) and Section 2 (6) and (7) of the Act.
4. The appropriate unit
We find, in agreement with the parties, that all life, fire, casualty,
and automobile insurance agents appointed by and acting for the
Employers in the State of California, excluding office and clerical
employees, guards, professional employees, district managers, and
all other supervisors as defined in the Act, constitute an appropriate
unit for the purposes of collective bargaining within the meaning of
Section 9 (b) of the Act.
Accordingly, we shall set aside the original Decision and Order
issued herein.
Order
IT IS HEREBY ORDERED that the Decision and Order issued herein on
March 20, 1952, be, and it hereby is, vacated and set aside.
[Text of Direction of Election omitted from publication in this
volume.]
MEMBER MURDOCK took no part in the consideration of the above
Amended Decision and Direction of Election.
12 N. L. R. B: v. Phoenix Mutual Life Insurance Company, 167 F . 2d 983 (C. A. 7).