When his children were young, Nathan Littlejohn was a regional salesman in search of a position that would allow him to spend more time with his family. So when he heard about Allstate’s neighborhood agent program in 1990, he was intrigued.
During the next several years, he said, he worked around the clock to build his customer base and poured about $40,000 of his own money into his agency, located in Overland Park, Kan. He figured it was a long-term investment.
Using similar logic, Craig Crease was able to justify investing $120,000 in his Kansas City, Mo., Allstate agency over the course of 14 years. The same went for Ron Harper in Thomson, Ga., who spent about $80,000.
But after building up their agencies for nearly a decade or more, the agents said they were called into meetings in late 1999 by Allstate managers. The agents could keep on selling Allstate policies, they were told, but they would no longer be entitled to health insurance, a retirement account or profit-sharing, and their pension benefits would no longer accrue. Instead, they would become independent contractors.
“They just pulled the rug out from beneath me,” said Littlejohn, now 65, who had two college-age children at the time. The company said the changes were the result of a “group reorganization.”
The men are among 6,200 agents who faced the same predicament: To continue to work with Allstate, the insurer required them to sign a release waiving their rights to sue. Most of them did sign, but a group of 31 agents sued Allstate anyway, for, among other claims, age discrimination and breach of contract.
Thirteen years later, the case is still winding through the courts. A judge ruled in February that a jury should decide whether the waiver the agents signed was valid, and it appeared, briefly, a trial date would be set for this spring. But last-minute complications have delayed the process again.
More documents in the case — the plaintiffs are seeking class-action status — are expected to be filed this month.
The Allstate case demonstrates the risks inherent in signing documents — as the agents did — agreeing not to sue. The latest ruling in the case hangs on that very point.
Before the agents can bring the discrimination and other claims, a jury must decide that the employees were coerced into signing the waivers. Allstate, on the other hand, contends they signed knowingly — a point the company must prove to prevail.
In a statement, Allstate said it continually improved the way it did business to help customers and agents, and the plaintiffs were offered “significant benefits to participate in such a change, including the ability to sell their agencies, which they could not have done as employees.”
But the agents, 90 percent of whom were older than age 40, said the consequences of not signing the release were costly: They would be prohibited from working as insurance agents within one mile of their agencies for one to two years, even though the agents leased or bought their offices in their own name. They would not be allowed to keep their business phone numbers. And the agents said Allstate warned them that they could never solicit their old customers, which they later learned was not true.
“Whatever options they offered left me worse off than I was before,” Crease said.
By calling the program a group reorganization, the company was able to avoid providing employees who did not sign the release severance of up to 52 weeks’ pay, Judge Ronald L. Buckwalter of the U.S. District Court for the Eastern District of Pennsylvania said in an April 7 memo. Yet the judge said that Allstate’s cost-cutting program was just a staff reduction in disguise.
He did not rule on whether Allstate’s actions were illegal, but did note that it was “self-serving and, from most perspectives, underhanded.”
Benefit of signing
Agents who signed the release and chose to work as contractors would generally get a $5,000 bonus and higher commissions, according to those with knowledge of the terms. Those who signed could also have chosen to sell their business or receive enhanced severance of up to 52 weeks of commission paid over two years.
The agents also said that Allstate made a series of misrepresentations. For instance, the agents said the company told them when they signed the release that it had no plans to cut commission rates. But the company’s documents show that it was planning to cut certain commissions, and it did reduce some of them in 2003, according to Buckwalter, who ruled in February that the case should go to trial.
The agents also claimed that Allstate said they would have the opportunity to take other positions — such as in claims or underwriting — which would have allowed them to keep their benefits. But in 2000, while severance was being received, Allstate imposed a one-year hiring moratorium, which meant the agents could not be rehired.
In 2009, Allstate paid 90 of the agents $4.5 million to settle an age discrimination suit, related to the moratorium, that was brought by the Equal Employment Opportunity Commission.
“But the biggest misrepresentation was telling them, ‘You may never — not for one year, or two or three — but you may never solicit your former customers, even if you go into vacuum sales,’ ” said Michael Lieder, a lawyer with Sprenger & Lang, and co-counsel representing the agents.
Harper sold his agency in 2002; he said he did not recoup his costs. After that, he bought and later sold a pizza parlor and worked as an insurance adjuster during hurricane season. He and his wife now run a paper-shredding business and an independent insurance agency in the same building that he bought to run his Allstate agency.
“The years that you make the most money for most jobs are the 10 years before retirement,” he said. “Instead, I find myself scraping by with my wife, working 50 hours a week for what would be entry-level salaries.”
Littlejohn and his wife are living in their daughter’s condo after losing their home in bankruptcy in 2011. He is working as an independent insurance agent after being fired by Allstate.