DOUGLAS P. WOODLOCK, UNITED STATES DISTRICT JUDGE
Thomas Ruggiero, an insurance agent, brought this action against American United Life Insurance Company and OneAmerica Financial Partners, Inc., alleging that the defendants misclassified him as an independent contractor in violation of Mass. Gen. Laws ch. 149, § 148B, and accordingly violated two Massachusetts wage laws.
Ruggiero now moves for summary judgment on Count I of his complaint, alleging improper classification as an independent contractor. For their part, the defendants move for summary judgment on all three counts of the complaint, contending summary judgment should be granted in their favor on Count I and then it should also be granted as to the additional counts because the identified wage laws do not apply to independent contractors.
Prior to his relationship with AUL, Ruggiero was an insurance agent for approximately 25 years for AXA Equitable Life Insurance Company, a competitor of the defendants. During his tenure at AXA, Ruggiero served as an agency manager, responsible for recruiting and training insurance agents; sold insurance and annuity
OneAmerica Financial Partners, Inc. ("OneAmerica") is a network of companies that provide financial and insurance products, including retirement plan products, individual life insurance and annuities, long-term care insurance, and employee benefits insurance and annuities. American United Life Insurance Company ("AUL") is a mutual life insurance company based in Indianapolis, Indiana, that is a subsidiary of OneAmerica. AUL is licensed and authorized to conduct life insurance business in every state but New York, and in the District of Columbia. Among the functions that AUL employees perform are underwriting, setting premium rates for insurance policies, designing and drafting policy language, obtaining regulatory approval for the insurance products, investing the policy premiums, performing actuarial calculations, and administering the policies and products AUL offers.
AUL does not engage in the retail sale of its policies. Instead, AUL and its affiliates authorize insurance agents and brokers, banks, credit unions, brokerage and investment firms, and insurance wholesalers to distribute these products. An individual can learn about AUL's products on the OneAmerica website or through OneAmerica's toll-free number, and from there will be directed to a "financial professional" in a regional office for purchasing.
Among its retail sales and distribution methods, AUL works with a network of general agents and career agents. The parties dispute whether these agents were the primary vehicle for the sale of AUL's insurance and annuity products during the parties' relationship. General agents agree to sell AUL's products on a non-exclusive basis and recruit other agents (career agents) and brokers to work under them.
AUL has a unit staffed with three vice presidents and other employees who manage the relationships with general agents to make it "as easy as possible" for them to sell AUL products. Through this unit, AUL provides general agents with information and marketing materials regarding its products, offers "various volume-based financial incentives," and invites general agents to attend annual meetings and participate in trainings.
In 2008, Ruggiero prepared a business plan to establish his own insurance agency. In early 2009, he contacted AUL about the possibility of signing on as a general agent and managing his own agency. At the time, AUL was seeking to expand its presence and reputation in New England.
Ruggiero signed a General Agent's contract with AUL on February 1, 2009 with the purpose of establishing and building an agency in Boston that would sell AUL products.
Thereafter, Ruggiero established Ruggiero Insurance and Financial Services LLC ("RIFS"). The business cards, website, letterhead, and e-mail signature for his agency all identified it as affiliated with AUL; AUL contends that this identification was required for compliance with regulatory standards for the sale of securities. Concurrent with the contract, AUL lent Ruggiero $80,000 to assist him in developing his agency. AUL and Ruggiero also entered into a Cash Flow Amendment, pursuant to which AUL agreed to pay Ruggiero $150,000 to help him sustain his agency. This Amendment was later replaced with a term promissory note of the same amount.
Under the contract, Ruggiero was to "recruit, train, and supervise agents and brokers" for AUL in Massachusetts "without exclusive representation," to supervise these agents and brokers, and to "solicit applications for AUL's individual and group life, health, and annuity policies and contracts, both personally and through the efforts of his agents and brokers." AUL would pay Ruggiero "overriding commissions and service fees" on insurance and annuity policies and contracts issued by AUL and secured by either Ruggiero himself "or his agents or brokers," and on policies and contracts serviced by Ruggiero or his agents or brokers, as well as "allowances[,] ... writing commissions, bonuses, and service fees." The contract classified Ruggiero as an independent contractor and conferred on him freedom "to exercise independent judgment as to the time, place, manner, and means in which he carries out his duties and responsibilities," and required him to pay his own expenses for maintaining an office.
By the terms of the contract, Ruggiero was not permitted to "act as a General Agent, Agency Manager, or hold a full-time contract with any other life insurance company," or to "enter into an employment contract or agreement with any individual or organization ... without the prior written approval" of AUL. However, according to AUL, all of the third parties that distribute AUL's insurance products — including general agents — are free to sell the products of other life insurance companies, and indeed most general agents have contractual relationships with other insurance companies. Although Ruggiero was also free to sell non-AUL securities, those sales were processed through OAS as Ruggiero's broker-dealer.
During his relationship with AUL, Ruggiero freely maintained relationships with numerous other insurance companies without express permission from or disapproval by AUL. Ruggiero previously had been authorized to sell the products of more than 25 insurance companies in Massachusetts and more than 15 insurance companies in New York and other states. During the effective term of his contract with AUL, Ruggiero entered into agreements with Crump Life Insurance Services, an insurance wholesaler representing over
Ruggiero also recruited and trained approximately thirty agents during his contract term with AUL. Ruggiero's career agents were required to enter into contracts with AUL to sell its products. They also established relationships with and made sales through other insurance companies, including Crump, at Ruggiero's direction. Some of the agents Ruggiero recruited had their own businesses or performed their work out of their own offices. Ruggiero's agents received a guide he prepared that instructed them to sell all non-AUL, non-securities products through Crump and set forth a variety of policies for agents, including working hours, vacation, and dress code policies.
During his relationship with AUL, Ruggiero received commissions from AUL, OAS, and Crump on the sales of these products by him and the agents he supervised, as well as agency maintenance and developmental allowances from AUL.
Ruggiero began to wind down his agency in 2013. That year, he stopped recruiting career agents because the expenses of running his agency exceeded his revenue. He completely ceased the operations of the agency in September 2014. At that time, he ended his relationship with AUL and became a financial advisor with New England Financial, an affiliate of Metropolitan Life Insurance Company. Ruggiero represented that his work with New England Financial would be a continuation of his prior work, and has maintained the same business contact information throughout his tenure at AXA, AUL, and now at New England Financial.
Ruggiero filed this action in Massachusetts Superior Court on October 9, 2013, asserting three counts against the defendants: (I) violation of the Massachusetts independent contractor law, Mass. Gen. Laws ch. 149, § 148B, by misclassifying Ruggiero as an independent contractor instead of an employee; (II) violation of the Massachusetts Wage Act, Mass. Gen. Laws ch. 149, § 148, by imposing unlawful costs, expenses, and charges on Ruggiero; and (III) violation of the Massachusetts minimum wage law, Mass. Gen. Laws ch. 151, § 1, by paying Ruggiero less than minimum wage. Ruggiero seeks statutory damages, treble damages, and attorneys' fees.
The defendants removed the case to federal court on the basis of diversity jurisdiction. They thereafter answered the complaint and asserted counterclaims against Ruggiero to enforce the two promissory notes executed by him and held by AUL with an outstanding balance of $155,912.46.
Ruggiero has now filed a motion for partial summary judgment as to AUL's liability under Count I of his complaint. The defendants have responded by moving for summary judgment on all counts, but address only Count I in their briefing.
The purpose of summary judgment practice is "to pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial." Garside v. Osco Drug, Inc., 895 F.2d 46, 50 (1st Cir.1990) (citation omitted). Summary judgment is appropriate when, based on the pleadings, discovery, and disclosure materials in the record, "there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a), (c). A "genuine" dispute is one that, based on the supporting evidence, "a reasonable jury could resolve ... in favor of the nonmoving party," and a "material" fact is one that has "the potential to affect the outcome of the suit under the applicable law."
When reviewing a motion for summary judgment, I view the facts "in the light most favorable to the non-moving party." Zambrana-Marrero v. Suarez-Cruz, 172 F.3d 122, 125 (1st Cir.1999). If the moving party satisfies the burden of showing, based on evidentiary material, that there is no genuine issue of material fact, the burden shifts to the nonmoving party to demonstrate by reference to specific provable facts "that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); see Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) "[C]onclusory allegations, improbable inferences, and unsupported speculations" are insufficient to establish a genuine dispute of fact. Medina-Munoz v. R.J. Reynolds Tobacco Co., 896 F.2d 5, 8 (1st Cir.1990).
Where, as here, both parties have moved for summary judgment, I consider each motion "on an individual and separate basis, determining, for each side, whether a judgment may be entered in accordance with the Rule 56 standard." Bienkowski v. Northeastern Univ., 285 F.3d 138, 140 (1st Cir.2002) (citation omitted); see Mandel v. Bos. Phoenix, Inc., 456 F.3d 198, 205 (1st Cir.2006). Summary judgment is appropriate if "either of the parties deserves judgment as a matter of law on facts that are not disputed." Adria Int'l Grp., Inc. v. Ferré Dev., Inc., 241 F.3d 103, 107 (1st Cir.2001).
The Massachusetts independent contractor statute, Mass. Gen. Laws ch. 149, § 148B(a), "establishes a framework for determining whether a worker is an employee or an independent contractor" for the purposes of entitlement to the "benefits and rights of employment." Depianti v. Jan-Pro Franchising Int'l. Inc., 465 Mass. 607, 990 N.E.2d 1054, 1066 (2013) (quoting Taylor v. E. Connection Operating, Inc., 465 Mass. 191, 988 N.E.2d 408, 413 (2013)). The statute presumes that "an individual performing any service" is an employee and therefore is entitled to the benefits of the Massachusetts wage and overtime laws. See id. (quoting Mass. Gen. Laws ch. 149, § 148B(a)).
To rebut the presumption and classify an individual as an independent contractor, a putative employer must satisfy a three-prong test set forth in § 148B(a):
Mass. Gen. Laws ch. 149, § 148B(a). If the putative employer does not prove all three prongs, the individual must be classified as an employee. See Sebago v. Bos. Cab Dispatch, Inc., 471 Mass. 321, 28 N.E.3d 1139, 1146 (2015); Somers v. Converged Access, Inc., 454 Mass. 582, 911 N.E.2d 739, 747 (2009). In interpreting the statute, I rely in part on an advisory from the Office of the Massachusetts Attorney General, which
As a threshold matter, it is necessary to identify what service Ruggiero provided to the defendants. See Sebago, 28 N.E.3d at 1148-49. It is undisputed that Ruggiero sold at least some insurance products on behalf of AUL. In addition, Ruggiero recruited, trained, and supervised career agents who also sold insurance products on behalf of AUL. With this in mind, I consider each prong of the independent contractor test.
Under the first prong, the defendants must demonstrate that Ruggiero was "free from control and direction in connection with the performance of the service." Mass. Gen. Laws ch. 149, § 148B(a)(1). Although an employment agreement can be instructive, the crux of the inquiry is in the actual relationship between the parties, and whether the plaintiff performs his work in fact "with minimal instruction." Att'y Gen. Advisory at 3. "The essence of the distinction under common law has always been the right to control the details of the performance ... and the freedom from supervision `not only as to the result to be accomplished but also as to the means and methods that are to be utilized in the performance of the work.'" Athol Daily News, 786 N.E.2d at 371 (citations omitted).
As a preliminary matter, I observe the language of the contract between the parties indicates that Ruggiero was free to perform his services as he desired. The contract specifically classifies Ruggiero as an independent contractor and entrusts him "to exercise independent judgment as to the time, place, manner, and means in which he carries out his duties and responsibilities." But see Somers, 911 N.E.2d at 748-49 (agreement between employer and individual as to status as employee or independent contractor does not govern).
The contract gives Ruggiero specific tasks: recruiting, training, developing, and supervising agents and brokers, and soliciting applications for insurance and annuity policies. In performing these tasks, the contract requires that Ruggiero "maintain an office for the purpose of carrying out his duties and responsibilities," "pay all expenses of this office," keep premium collections "separate and distinct from all other funds," "keep a record of all business transacted," comply with all applicable state and federal laws and regulations, and with "the Company's published rules, regulations, policies, and procedures respecting the conduct of its business, including but not limited to, the Principles and Code of the Insurance Marketing Standards Association," and "conduct himself as not to affect adversely the business, good standing, or reputation of himself or the Company." Beyond that, the contract does not prescribe how the requisite tasks are to be
Ruggiero makes two main arguments in support of the contention he was not free from the control or direction of AUL. First, he asserts that being subject to AUL's rules, regulations, policies, and procedures, pursuant to the contract, limited his independence. Read in a wooden fashion, the broad language in the contract might suggest that Ruggiero was subject to wide-ranging oversight by AUL. But the inquiry I conduct requires an assessment of the actual relationship between the parties, not merely a theoretical one. See Mass. Gen. Laws ch. 149, § 148B(a)(1); see also Machado v. System4, LLC, 471 Mass. 204,28 N.E.3d 401, 411 (2015) ("statutory language directs a look both at the worker's agreement, if any, as well as the actual working relationship"). As specific examples of AUL's oversight, Ruggiero argues that AUL required him to gain its approval for his promotional materials, website, and office signage, and required him to establish his agency as a limited liability corporation. Ruggiero does not otherwise point to any particular policies AUL enforced that limited his freedom in running his agency.
AUL contends that the branding requirements and the requirement that Ruggiero establish his agency as a legal entity — not necessarily as a limited liability corporation — were attributable to federal securities laws applicable to Ruggiero because of his status as an OAS registered representative. These regulations could be interpreted as subjecting Ruggiero not to AUL's control and direction, but rather to the oversight of a regulatory agency. Cf. Santangelo v. N.Y. Life Ins. Co., Civ. Action No. 12-11295-NMG, 2014 WL 3896323, at *9 (D.Mass. Aug. 7, 2014) ("A company does not exercise the requisite control necessary to create an employer-employee relationship merely because it restricts the manner or means of their work in order to comply with statutory and regulatory requirements."), aff'd, No. 14-1912, 785 F.3d 65, 2015 WL 1534145 (1st Cir. Apr. 6, 2015); Sebago, 28 N.E.3d at 1150 (restrictions on taxi drivers' "appearance, cellular phone usage, ability to smoke, procedures for obtaining or refusing passengers, standards for the treatment of passengers, meter rates, and geographical areas of operation" were imposed by municipal regulation governing taxicabs, and not by defendant medallion owners or radio associations; plaintiffs were otherwise free from control and direction of defendants).
The recent decision by the Supreme Judicial Court in Monell v. Boston Pads LLC, 471 Mass. 566, 31 N.E.3d 60, 67-70 (2015) suggests that where a relationship as defined by regulation expressly precludes the satisfaction of a prong of the independent contractor statute, the independent contractor statute will not govern.
Monell accordingly recognizes that statutory schemes dictating the terms of a working relationship may have a preemptive effect on the application of the independent contractor statute if, by their terms, they defeat any given prong of the statutory test. It does not, however, stand for the proposition that whenever a regulatory scheme precludes the application of the independent contractor statute, the individuals subject to that regulatory relationship must be classified as employees. Instead, if the applicable statute did not intend to dictate the classification in derogation of the independent contractor statute, the general statutory test for independent contractor status would presumably continue to be used to classify the individual.
The relationship of a registered representative and a broker-dealer is no doubt highly regulated in a fashion similar in some respects to that addressed in Monell. However, the parties in this case have not meaningfully focused on the regulatory framework governing their relationship and have not argued that the regulatory scheme precludes the application of the independent contractor statute overall. Accordingly, I must conduct the analysis here on the assumption that the regulatory scheme governing the particular relationship at issue and the Massachusetts independent contractor statute are capable of coexistence. AUL has not identified the particular laws or regulations imposing regulatory requirements, despite being given an opportunity to do so following the June 2015 hearing on this matter.
That does not save Ruggiero under this prong, however. Regardless of whether regulatory oversight might displace this prong of the general statutory independent contractor test, it is plain that the requirements for branding and corporate form do not meaningfully restrict = Ruggiero's
Although required branding could arguably be analogized to a uniform worn by a delivery worker, this one imposition, standing alone, is not enough to impinge significantly on Ruggiero's control of his operations. See Athol Daily News, 786 N.E.2d at 371 (test under prong one "is not so narrow as to require that a worker be entirely free from direction and control from outside forces" (internal quotation marks omitted)); cf. Fucci v. E. Connection Operating, Inc., No. MICV 2008-2659, slip op. at 7-8 (Mass.Super.Ct. Sept. 24, 2009) (delivery company's provision of detailed daily work schedules with set pickup and delivery times, requirement that plaintiffs obtain vehicles sufficiently large to transport daily deliveries, and uniform requirement found sufficient to demonstrate that defendant "exercised a degree of control and direction over the plaintiffs' performance, both under their Agreements and in fact"). Similarly, the corporate form requirement does not constitute any meaningful impingement upon Ruggiero's operation of his business in affiliation with AUL.
Ruggiero also argues that AUL supervised him and his performance under the contract through the office of its Chief Agency Officer. This office employs three agency vice presidents — previously two territorial vice presidents — who oversee and provide support to general agents. They and their staff conduct quarterly agency reviews and evaluate agents' performance overall. The territorial vice president assigned to Ruggiero, Jeff Pikus, contacted or met with Ruggiero thirty-five times over the course of three years to review his productivity, recruiting activities, and sales goals. However, there is no indication that Pikus directed Ruggiero's activities or exerted any control over his agency; the record discloses that he merely checked in on Ruggiero's progress, offered resources for continued success, and performed some measure of ad hoc quality assurance for AUL. That AUL was invested in the success of its agents does not mean that it controlled their work.
Apart from the limited actual oversight provided by AUL, Ruggiero had extensive flexibility in running his agency. Ruggiero himself acknowledged this freedom. He was free to sell the products of other companies, to provide his agents with training on other products, to seek and advise clients however he saw fit, to recruit agents however he chose, and to run the agency as he desired. In advising clients on which life insurance policy to choose, Ruggiero would consider the benefits to the specific client of various companies' products and would take a "holistic approach" to the client's needs. Although AUL provided agents with minimum production requirements, and the contract indicated that agents could not be general agents or full-time employees of another insurance company, AUL did not enforce the production requirements or interfere with Ruggiero and his agents selling the products of competitors. In addition, although the contract gave AUL "the sole right to determine when an agent or broker
In the context of applying a very similar "right to control" test to determine if an individual is an employee or an independent contractor for the purposes of federal and state employment discrimination statutes, federal courts have consistently found that insurance agents acting just as Ruggiero did were independent contractors. See, e.g., Murray v. Principal Fin. Grp., Inc., 613 F.3d 943, 944-45 (9th Cir. 2010) ("We, along with virtually every other Circuit to consider similar issues, have held that insurance agents are independent contractors and not employees for purposes of various federal employment statutes...."); McAdams v. Mass. Mut. Life Ins. Co., 391 F.3d 287, 290 (1st Cir. 2004) (general agents for defendant insurance company were independent contractors because they did not receive salary from defendant and did not have to provide profit and loss statements, but did receive financial support from defendant for rent and other expenses); see also Speen v. Crown Clothing Corp., 102 F.3d 625, 633 (1st Cir.1996) (clothing sales representative "was kept on a rather long leash, if not actually allowed to run free in a rather large yard," with freedom to "decide[ ] where he went and how long he worked on any particular day," and "[h]ow and in what order he covered his territory"; he was "not required to carry anything, do anything, or say anything in particular as he went about trying to sell [defendant's] (and other) products," and was paid on commission); Santangelo, 2014 WL 3896323, at *8 (plaintiff "arranged his own meetings with clients, determined his own sales strategy and could sell products in any state in which he was licensed," "worked whatever hours he felt were appropriate on a given day and was not required to report to [defendant] on a daily basis," "did not have regularly scheduled meetings outside of the one annual sales training," "rented his own office space and bought his own supplies and office furniture," "was paid a commission rather than a salary," and "was free to sell the products of other life insurance companies and did so during the time he had a contract with [defendant]").
Although there are some indicia of loose direction in the record before me, in light of the autonomy Ruggiero exercised to run the day-to-day operations and dictate the long-term priorities of his agency, a reasonable fact finder could not conclude on this record that Ruggiero was subject to the type of control and direction by AUL that would indicate employee status. Accordingly, the defendants have met their burden on prong one.
As is often the case in this area, the crux of the parties' dispute is found in the second prong. See, e.g., Awuah v. Coverall N. Am., Inc., 707 F.Supp.2d 80, 82 (D.Mass. 2010); Sebago, 28 N.E.3d at 1150. Under this prong, the defendants must prove that the service the plaintiff provides "is performed outside the usual course of the business of the employer." Mass. Gen. Laws ch. 149, § 148B(a)(2).
Ruggiero provides two related services for the defendants: selling AUL's products and recruiting and training career agents who also sell AUL's products. Because these are distinct services, I consider each in turn.
I begin with the defendants' own public-facing definition of its business, which "is indicative of the usual course of that business." Sebago, 28 N.E.3d at 1150. OneAmerica's website states that AUL "offers a comprehensive portfolio of products for individuals, families, and businesses." Although Ruggiero points to statements in OneAmerica's annual report and on its website emphasizing that its "focus is on our customers," OneAmerica does not present itself as actually selling the insurance and financial products it offers. Instead, it educates consumers about its products and indicates that it "provides local service through a national network of experienced financial professionals." OneAmerica's website states that "[f]inancial professionals at General Agencies work to bring you our life insurance policies and annuities designed to meet the needs of individuals, families and small business clients." Its annual report further states that "[o]ur trusted and skilled financial professionals recognize OneAmerica as a valuable partner to help them grow their practice.... [W]e provide the tools to help them better develop customized strategies aligned with your financial goals."
The website and other materials suggest that the defendants' primary business function is the provision of insurance products. To be sure, sales are essential to AUL's success. But AUL makes clear that it is not in the business of selling insurance products directly; it is in the business of determining which products to make available, structuring and drafting the policies, obtaining regulatory approval for these policies, and investing the policy premiums. For this reason, it employs underwriting specialists and actuaries who determine pricing and premium rates, conduct financial reporting and modeling, and assess risk. It also employs individuals tasked with overseeing AUL's relationships with agents who conduct direct consumer sales.
To demonstrate that retail sales must be essential to and within the usual course of its business, Ruggiero emphasizes that OneAmerica made $2.4 billion in 2013 from sales of its products. AUL, for its part, asserts that this economic value is essentially derived from its writing of policies that obtain regulatory approval and are perceived as being of value to both agents and consumers. I agree with the defendants that providing information about and fashioning a product one manufactures is not the same as being in the business of directly selling it. Indeed, many product manufacturers educate consumers about their products without engaging in direct retail sale. This distinction is supported by evidence presented by the defendants that within the insurance industry, there is a
It is important to this analysis that OneAmerica could still produce insurance products without general agents such as Ruggiero. As critical as sales ultimately are to OneAmerica's financial stability, at its core, OneAmerica manufactures — rather than sells — a product. Any manufacturing business is, of course, dependent on such ancillary functions as product sales and advertising. But this dependency does not automatically incorporate the ancillary functions into the usual course of the manufacturer's business. As the Supreme Judicial Court has observed:
Sebago, 28 N.E.3d at 1152 (quoting Cannon v. Crowley, 318 Mass. 373, 61 N.E.2d 662, 665 (1945)).
This manufacturing-sales dichotomy may seem formalistic, but it is grounded practically in business arrangements where the manufacturer does not engage in direct sales but instead empowers individuals to engage in their own, separate businesses that involve — but do not consist exclusively of — the sale of the manufacturer's products. To be sure, as the Supreme Judicial Court has made clear, an artificial deconstruction of business operations "into component parts" using "illusory distinctions" may not be used "to avoid the strictures of the Wage Act." Sebago, 28 N.E.3d at 1155. But where a business has legitimately defined the boundaries of its operations, and out-sourced functions it considers to be beyond those boundaries to "separately defined" businesses or third parties, id. at 1153, the independent contractor statute cannot be used to expand those boundaries. Id. at 1155.
Although the parties do not cite any case addressing this type of relationship — a defendant who manufactures and administers insurance policies, and a plaintiff who offers consumers the opportunity to purchase those policies — the case law suggests the conclusion that such sales activity is not within the usual course of the defendant's business.
Two categories can be discerned from the case law: on the one hand, there are cases in which the defendants equip the plaintiffs with the tools, resources, and opportunity to sell or provide the defendants' products, often earning a commission or percentage of the sales, and essentially franchising their business; and on the other, there are cases in which the defendants merely give the plaintiffs a license or a product and leave the plaintiffs to their own devices to make a profit from it. Compare Martins, 2013 WL 1320454, at *14 (delivery company held itself out publicly as a delivery company and contracted directly with customers to provide services; plaintiffs performed "a vital and necessary aspect of its business" by providing "the delivery services that, both internally and publicly, appear to form the foundation of its business"); Awuah, 707 F.Supp.2d at 82, 84 (rejecting argument that franchising is in itself a business, and concluding that cleaning franchisor engaged in same business of commercial cleaning as cleaners themselves); DeGiovanni v. Jani-King Int'l, Inc., Civ. Act. No. 07-10066-MLW, hearing tr. at 81 (D.Mass. June 6, 2012) (commercial cleaning company engaged in same business as janitorial workers because
These cases demonstrate that management or administration of the provision of services and the performance of those same services are considered to be the same course of business. See, e.g., Oliveria, 2010 WL 4071360, at *6. But they leave room for the conclusion that the manufacture of a product is not necessarily the same course of business as selling or using that product to make a profit. AUL's operation here is qualitatively different from those of the delivery and cleaning companies, the adult entertainment lounge, and even the taxi medallion and dispatch companies discussed above, because without sales of the insurance products through agents like Ruggiero, AUL would still have a product and other mechanisms by which to profit from it.
On the record before me, a reasonable fact finder could not find that AUL was in the business of selling insurance products. Ruggiero has not pointed to any evidence that AUL or OneAmerica actually sells the products it manufactures. The defendants' creation and administration of insurance products is "only incidentally dependent" on the sale of them by general agents. Cf.Sebago, 28 N.E.3d at 1152.
Even if sales were an essential part of AUL's business, it cannot be said that AUL's business is "directly dependent on the success of [Ruggiero's] endeavors." Sebago, 28 N.E.3d at 1151. Although this case bears indicia similar to those cases in the first category described above — a defendant who benefits financially with each of the plaintiff's sales, and who invests in the plaintiff's success — it has two important distinctions (leaving aside a third — that the plaintiff and the defendant are engaged in discretely different businesses — as discussed above).
First, there is some evidence that AUL could and did facilitate the sale of its products through methods other than general agents. Ruggiero contends that AUL products are sold primarily through general agents, but offers no persuasive support for this assertion other than the existence of a unit at AUL dedicated to overseeing general agents. AUL asserts that general agents are not the primary vehicle, but rather that certain AUL products sold by general agents are also sold by banks, credit unions, investment firms, and wholesalers.
There is ample evidence, as discussed in relation to the other prongs, that Ruggiero's activities benefited AUL but also benefited other similar insurance companies. See Sebago, 28 N.E.3d at 1151 ("the second prong should not be construed to include all aspects of a business such that [the first and third] prongs ... become unnecessary" (alterations in original, internal quotation marks omitted) (quoting Att'y Gen. Advisory)). An incidental contribution to the defendant's revenues is just that — incidental. See id.
General agents come in all varieties and offer different levels of commitment to and enthusiasm for a given company's products. Within this broad universe of general agents, it cannot be said that AUL is dependent on the success of an agent like Ruggiero who, the evidence demonstrates, primarily sells the products of
Although, as a general matter, the second prong is focused on the
Here, Ruggiero gave independent advice to customers he developed on his own — many before he became affiliated with AUL — and sold primarily non-AUL products (more than 95% of the time). To be sure, general agent relationships undoubtedly benefit the principal when a sale is made. It is undisputed that AUL derived a benefit each time Ruggiero or one of his agents sold an AUL product, because it received the customer's premium and investment, and had to pay only a portion to Ruggiero for obtaining the sale, and that OAS earned some commission as broker-dealer each time Ruggiero (or one of his agents) sold a non-AUL security. Cf.Kubinec, 2014 WL 3817016, at *10-13 (defendant taxi dispatch service received only incidental benefit when plaintiff accepted a dispatch from it because defendant's "dispatches constituted only approximately 9.95% of all fares driven" by dispatch's agents in given year, and because defendant "received only the same weekly payment from its members regardless of
For the reasons discussed above, however, an agent will not be considered an employee of a company simply because he makes sales that benefit the company. On these particular facts, it cannot be said that AUL was "directly dependent on the success of [Ruggiero's] endeavors," Sebago, 28 N.E.3d at 371, when his endeavors included AUL's interest in so limited a manner. Cf. Gotchis v. Allstate Ins. Co., Civ. A. No. 90-12553-Y, 1993 WL 795440, at *3 (D.Mass. Feb. 19, 1993) ("independent contractors who solicit business on behalf of any number of companies.... solicit for themselves, choosing the insurance carrier that best suits their clients' needs," and in so doing insurance agent "solicits on behalf of his own agency and is therefore regarded as the owner of his expirations"). Ruggiero's sales services were "merely incidental" to AUL's business. See Sebago, 28 N.E.3d at 1150 (quoting Att'y Gen. Advisory).
I reach the same conclusion with respect to Ruggiero's services in recruiting and training career agents and brokers. In supervising career agents and brokers, Ruggiero was acting in his own interest, because he would receive a commission for the sales attributable to these agents and brokers. Ruggiero's services were in the interest of AUL only to the extent that they generated sales of AUL products, and it is evident that not all sales by career agents involved AUL products. Moreover, if such sales are not in any event an essential component of the defendant's business, then the recruiting, training, and supervision of career agents — one of many types of sales agents available to AUL — surely is not essential.
It is undisputed that AUL has a unit dedicated to overseeing agents, and specifically to liaising with general agents and equipping them with resources to recruit and train career agents and brokers. As discussed above, the unit is led by a Chief Agency Officer, who oversees three agency vice presidents (previously two territorial vice presidents) and other employees who assess the productivity of the general agents on a regular basis. The territorial vice president assigned to Ruggiero had regular communications with him to check in on his progress on performance and sales goals. There is no evidence on whether AUL maintained similar units for overseeing other retail sales mechanisms. This arrangement might be viewed as providing some support for Ruggiero's position that it was part of the usual course of the defendant's business to supervise and train agents — a task that Ruggiero himself undertook. Again, however, the specific facts of Ruggiero's operation belie his argument. AUL's agency unit was focused on equipping agents with tools and resources to sell — and arguably providing some quality control on the sales of — AUL products. The training Ruggiero provided to his agents — and indeed, the sales he and his agents obtained — went far beyond AUL products and focused primarily on those of other insurance carriers.
Given that Ruggiero and his agents maintained relationships with numerous other insurance companies, and that they sold the products of other insurance companies with far greater frequency than they sold AUL products,
Indeed, Ruggiero worked out individually with each agent how they would split the commission on the agent's sales, and further required them to enter into agreements with Crump, through which they made the majority of their sales. Had Ruggiero's team sold only or primarily AUL products, such that Ruggiero was essentially performing a training and supervisory function that would otherwise have to be performed by AUL, then the result may be different. To this end, Ruggiero argues that more than half of the commissions of several of his agents were attributable to sales of AUL products in certain years, and that he himself spent more than ninety percent of his time training agents. But clearly Ruggiero's training encompassed numerous products and was not limited to those of AUL. How much time Ruggiero spent recruiting, training, and developing agents with a specific eye toward AUL product sales, and how much time those agents ultimately dedicated to making these specific sales, cannot be determined with precision from the record before me. Such parsing, however, is unnecessary in this case.
Where the record makes clear that the sale of non-AUL products — including non-AUL securities, for which OAS received only an incidental benefit — was a significant component of the work of Ruggiero's agents, it cannot be said that Ruggiero's activities in recruiting and supervising agents were necessary to AUL's business.
In sum, the defendants have met their burden on prong two.
Under the third prong, the defendants must demonstrate that the plaintiff "is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed."
As discussed at length above, the undisputed evidence demonstrates that Ruggiero established an agency that sold the insurance products of both AUL and a number of other competing companies. Although the contract between Ruggiero and AUL by terms prohibited Ruggiero from serving as a general agent or full-time employee of another insurance company, this did not prevent Ruggiero from selling other products. In fact, Ruggiero had relationships with other insurance companies, including a wholesaler — Crump — through which he and his agents made a significant portion of their sales, despite also presenting themselves as AUL agents by carrying AUL's name on their promotional materials and correspondence. Cf. Amero v. Townsend Oil Co., No. 071080C, 2008 WL 5609064, 25 Mass. L. Rptr. 115, at *3 (Mass.Super.Ct. Dec. 3, 2008) (plaintiff was not "customarily engaged in an independently established business of the same nature as the service being provided" because he "did not provide fuel oil delivery services to anyone independent of [defendant], nor could he have given the non-competition agreement [defendant] required him to sign"). The sale of competing products is an important indicium of an independent operation.
As further evidence that Ruggiero had an independent business, I note he has employed the same business phone number at AXA (his previous employer), at the agency he created to work with AUL (RIFS), and now at New England Financial after ending his relationship with AUL. Ruggiero informed his clients of his transition to New England Financial and, it can be inferred, has continued to work with some of them there. These are strong indicia that Ruggiero "is capable of performing the service to anyone wishing to avail themselves of the services" and not simply through his relationship with AUL. See Athol Daily News, 786 N.E.2d at 373.
It is clear that Ruggiero was "an entrepreneur operating an independently established business," Oliveira, 2010 WL 4071360, at *7, albeit with the financial support and imprimatur of AUL. Indeed, it was this desire to operate independently that he concedes led him to partner with
Counts II and III of Ruggiero's complaint are premised on the conclusion that he is an employee under Mass. Gen. Laws ch. 149, § 148B, and therefore entitled to the protections of the Massachusetts Wage Act and the Massachusetts minimum wage law. Because I find, as a matter of law, that the defendants have satisfied all three prongs of the independent contractor test as to Ruggiero, there is no basis for the remaining counts. Accordingly, I will grant the defendants' motion for summary judgment on counts II and III as well.
For the reasons set forth above, I DENY the plaintiff's motion for partial summary judgment, Dkt. No. 37, GRANT the defendants' motion for summary judgment, Dkt. No. 53, and GRANT the defendants' motion for leave to file an additional affidavit, Dkt. No. 80. The parties shall submit a status report on or before October 16, 2015 proposing means to bring this matter to final judgment through resolution of the defendants' counterclaims.
For his part, Ruggiero challenges the admissibility of the testimony of Barry Gritton, submitted by affidavit and through deposition, on the basis that Gritton lacks personal knowledge of AUL's general agent relationships. I am satisfied that Gritton has sufficient personal knowledge to support his testimony. Gritton served as the Vice President of Agency Distribution from 2008 through 2012. In that capacity, he would have had direct knowledge of Ruggiero's relationship with AUL.
