United States District Court, N.D. California
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Re: Dkt. Nos. 59, 65.
For Thomas Hennighan, Plaintiff: Lawrance A. Bohm, LEAD ATTORNEY, Bradley J. Mancuso, Bohm Law Group, Sacramento, CA.
For Insphere Insurance Solutions, Inc, Defendant: Barbara Ann Fitzgerald, LEAD ATTORNEY, Kathryn T McGuigan, Morgan Lewis & Bockius LLP, Los Angeles, CA; Paulo Byron McKeeby, PRO HAC VICE, Morgan Lewis & Bockius LLP, Dallas, TX.
ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT
WILLIAM H. ORRICK, United States District Judge.
Determining whether an individual is an independent contractor or employee requires a fact-intensive analysis that is not often susceptible to resolution on summary judgment. Plaintiff Thomas Hennighan is an insurance sales agent who signed an independent contractor agreement with defendant Insphere Insurance Solutions, Inc., and each party has asked me to determine his classification as a matter of law. Hennighan was paid only commissions, had his own clients, kept his own hours (more than 50 percent of which were spent out of the office), and paid his own taxes and expenses. While Insphere had certain expectations about his sales results, it did not exercise sufficient control over the means and methods that Hennighan used to do his job to make him an employee. No jury could reasonably find differently, so I will GRANT Insphere's motion for summary judgment and DENY Hennighan's motion for partial summary judgment.
Insphere is in the business of selling insurance policies. Hennighan used to sell policies for it. His relationship with Insphere began on April 23, 2010, when he signed a contract entitled " Independent Insurance Agent Commission-Only Contract" with Insphere. Pl. Dep. Ex. 1. The agreement stated,
SECTION VII -- Independent Contractor
By executing this Contract, I [Hennighan] recognize and understand that I
am an independent contractor and nothing in this Contract or otherwise is intended to create an employer/employee relationship between Me and Insphere or an Insurance Company. . . . As an independent contractor, I will decide when, where, and the manner and means to conduct My business activities. While Insphere and/or its agents or representatives may from time to time provide Me with models and guidelines, I recognize and acknowledge that I have complete discretion to set My business hours and schedule.
As an independent contractor, I will be responsible for payment of all expenses and fees incurred by Me, including but not limited to business overhead, transportation, state and federal income tax, self-employment tax, social security tax, unemployment tax and workers' compensation. I am responsible for and shall pay all taxes, duties, assessments and other government charges related to My performance under this Contract.
If Insphere or an Insurance Company, or any of their respective agents or representatives, takes a position that I feel is contrary to My independent contractor status or requires Me to act in such a manner that I believe to be inconsistent with My independent contractor status, I agree to notify Insphere immediately . . . of such conduct.
Pl. Dep. Ex. 1, Section VII, at 6-7. Either Hennighan or Insphere could terminate the agreement at will. Pl. Dep. Ex. 1, Section X, at 8. Hennighan believed that he was hired to be a salesman for Insphere. Pl. Dep. 68:2-8. As part of this agreement, Hennighan would receive a commission whenever he successfully sold a policy for Insphere. Pl. Dep. 88:18-89:8. Hennighan read the agreement before he signed it. Pl. Dep. 134:3-5.
On the same day that he signed the contract, Hennighan also signed an " Administrative Fee Acknowledgement," which stated, " [a]s an independent contractor, I agree that I will be responsible for payment of all expenses and fees incurred by Me, or by Insphere on My behalf, including the $130.00 administrative fee required to process My Contract application, appointment fees, business cards and other miscellaneous fees related to My Contract." Pl. Dep. Ex. 2.
Shortly thereafter, in May or June 2010, Hennighan paid for and took online training to get a California health and life insurance license. Pl. Dep. 37:5-17. He paid for and received that license in June 2010. Pl. Dep. 35:7-18. He also paid for and took continuing education requirement classes in order to maintain his license. Pl. Dep. 38:25-39:22. In 2012, he paid for the renewal of his license. Pl. Dep. 35:19-24. There is no evidence that he ever received or requested reimbursement for these expenses.
Insphere offered various insurance products and carriers that Hennighan could sell. Pl. Dep. 58:1-11. These products included life and health insurance, and supplemental dental, vision, and disability policies. Pl. Dep. 70:19-22. Although Insphere brought certain products to Hennighan's attention, Hennighan could decide which products he would or would not sell. Pl. 112:3-19.
Hennighan had the opportunity to pursue prospective policyholders from a variety of sources. Schooler Mot. Decl. (Dkt. No. 61) ¶ 3. Hennighan testified that there are " countless" ways to get " leads," i.e., potential clients, including " talk[ing] to people on the street," purchasing them, or through networking. Pl. Dep. 79:7-19, 80:10-20. Hennighan purchased leads and even paid for a membership in a " tip club" to seek leads. Pl. Dep. 80:10-20, 81:14-82:5.
Ultimately, successful leads would become Hennighan's own clients. Pl. Dep. 131:2-11. However, a witness for Hennighan claims that Insphere " owns and controls all sales prospects and clients." Shirley Umamoto Mot. Decl. (Dkt. No. 68) ¶ 12.
For work, Hennighan paid for or provided his own laptop (Pl. Dep. 119:22-120:6), cellular phone and monthly usage fees (Pl. Dep. 120:11-22), printer (Pl. Dep. 121:5-18), paper and toner (Pl. Dep. 122:6-13), and car (Pl. Dep. 122:14-124:3). Hennighan also paid for the insurance and gas on his car, even when he used it while doing work for Insphere. Pl. Dep. 123:14-20. There is no evidence that he ever received or requested reimbursement for these expenses. Insphere provided Hennighan with access to its San Jose, California, office for use when meeting clients, but he did not have an assigned office. Pl. Dep. 117:2-23. He had to sign up to use office space for a day. Id. Hennighan worked outside of the office more than 50 percent of the time. Pl. Dep. 237:15-238:7. He kept his own office in Santa Cruz, California. Pl. Dep. 183:2-16.
Hennighan could sell insurance anywhere in California and did not need approval to set up an appointment with a potential client. Pl. Dep. 77:13-20, 146:23-147:2. He initially worked three days a week in the San Jose office, but then decided to work either at home or in his Santa Cruz office. Pl. Dep. 183:2-16. Much of his work was done at clients' houses, in public settings, or on the road. Pl. Dep. 119:17-19, 183:2-16, 237:15-238:7.
Larry Roth was the San Jose office's Agency Manager during the last few months of Hennighan's contract with Insphere and remains the manager to this day. Roth Decl. (Dkt. No. 60) ¶ ¶ 1, 3. Roth conducts a weekly sales meeting that typically occurs on Tuesday and usually lasts around an hour and one-half to two hours. Roth Decl. ¶ 2. While attendance at the sales meetings by agents is voluntary, he generally encourages them to attend if they feel it would be helpful for them to share marketing and related experiences with other agents. Id. Occasionally, agents are asked to attend product training to ensure that they comply with rules and regulations regarding the marketing of insurance and related products. Id.
Hennighan, however, says that he was " required" to attend annual regional meetings, to participate in a weekly call-in team meeting, and to participate on a call-in production report meeting three times a week. Hennighan Mot. Decl. (Dkt. No. 66) ¶ ¶ 12-15. He says that Insphere was careful about not calling the meetings " mandatory," but there was some expectation that they had to be attended. Pl. Dep. 142:20-25. Insphere also " strenuously advised" him that if he wanted to remain " employed by Insphere," he had to attend every such meeting. Hennighan Mot. Decl. ¶ 16. Other employees also testified that sales agents were required to participate in weekly call-ins and meetings. Greg Umamoto Mot. Decl. (Dkt. No. 69) ¶ 5; Shirley Umamoto Mot. Decl. ¶ 3. Agents were held accountable and threatened with termination if they missed phone-in meetings. O'Connell Mot. Decl. (Dkt. No. 67) ¶ 31-33.
Aside from the various meetings, agents " are not regularly in attendance" at the San Jose office but rather market and sell insurance and related products, and communicate with potential policyholders or other customers, on their own schedules and as they see fit. Roth Decl. ¶ 2. But one employee claims that sales agents are required to go into the San Jose office regularly. Shirley Umamoto Mot. Decl. ¶ 22. Roth asserts that other than periodically
reviewing agents' sales reports, he did not set an agent's work schedule or supervise or monitor an agent's work. Roth Decl. ¶ 2. He contends that he did not formally evaluate agents' or Hennighan's work. Roth Decl. ¶ 3. However, a former employee says that " Insphere requires performance evaluations" and sales agents are required to fill out goal sheets against which they are held accountable. Shirley Umamoto Mot. Decl. ¶ 17.
Insphere paid Hennighan commissions; it did not provide him with a salary or wages. Pl. Dep. 88:10-89:4. He never filled a time sheet for Insphere. Pl. Dep. 88:14-17. (However, insurance carriers would sometimes award Hennighan bonuses if he sold enough of their policies. Pl. Decl. 99:1-25.) Because Hennighan was free to establish his own schedule and determine the amount of investment, time, and otherwise that he wished to make in selling Insphere products, Hennighan bore the risk of profit or loss by controlling the amount of time, effort, and financial investment he chose to put into his sales activities. Schooler Mot. Decl. ¶ 2. Insphere did not provide him with vacation pay, holiday pay, or group health insurance, and no one ever told him that he would be eligible for it. Pl. Dep. 86:22-87:17. No one at Insphere ever told him that he could not take a lunch or rest break when he wanted to. Pl. Dep. 140:21-142:4, 241:24-242:4.
Two witnesses for Hennighan claim that Insphere expects its sales agents to not have outside businesses or to sell other companies' products. Shirley Umamoto Mot. Decl. ¶ ¶ 31, 34; O'Connell Mot. Decl. ¶ 19. One of them claims that Insphere agents were not allowed to have unapproved outside appointments and that she was told to warn a sales agent that if the agent did not give up her outside appointments, she would be terminated. O'Connell Mot. Decl. ¶ ¶ 4, 5.
Hennighan sold insurance policies outside of his relationship with Insphere because he felt that he needed more work. Pl. Dep. 107:16-18. Through Insphere, Hennighan had appointments to sell for insurance carriers such as Aetna, Health Net, HealthMarkets, Blue Cross Anthem, Genworth, and ING, but Insphere did not get its agents the ability to sell anunuities. Pl. Dep. 103:9-19, 105:3-18. So Hennighan got his own appointments outside of Insphere with Aviva and other insurance companies to sell annuities. Pl. Dep. 103:9-104:23, 136:24-137:1. He reached out to Steven Valdez of First Authority to get an annuity contract because Hennighan felt that his commissions were being cut back by Insphere and he needed to make money. Pl. Dep. 106:1-107:13.
Hennighan contracted with Insphere to only sell policies throughout California. Pl. Dep. 145:20-23, 146:23-147:2. Through Valdez, Hennighan became licensed to sell insurance in Arizona, Texas, and South Carolina. Pl. Dep. 146:4-22. In addition, Hennighan was appointed with Cigna Health and Life Insurance Company (Pl. Dep. 109:12-16, 111:6-12), Humana Insurance Company (Pl. Dep. 109:17-23), Assurety Life (Pl. Dep. 112:20-22), Blue Shield of California (Pl. Dep. 112:25-113:18), Time Insurance Company (Pl. Dep. 113:21-114:1), Golden Rule Insurance Company (Pl. Dep. 114:9-14), Guarantee Trust Life (Pl. Dep. 114:15-16), and Royal Neighbors of America (Pl. Dep. 115:10-11).
Hennighan reported on his tax returns that he did not receive any wages in 2010, 2011, and 2012. Pl. Dep. Exs. 4 (2010 tax return) & 5 (2012 tax return); McGuigan Decl. Ex. 6 (2011 tax return). Instead, Hennighan reported earning business income and deducted various business expenses, e.g., for his cell phone, lead purchases, and driving mileage. Id.
On November 18, 2011, Hennighan filed a complaint with the California Division of Labor Standards Enforcement alleging that he was improperly treated as an exempt employee and that Insphere did not pay all his wages. Pl. Dep. Ex. 6. On February 2, 2012, after a conference was held to determine the validity of the claim, a Deputy Labor Commissioner determined that Hennighan was an independent contractor. Pl. Dep. Ex. 8.
Roth never met Hennighan after he was assigned to the San Jose office in February 2012 until he was deposed in this action. Roth Decl. ¶ ¶ 1, 4. After Roth started in San Jose, Hennighan had no contact with the office, sold no insurance policies or other products, and attended no meetings at the office. Roth Decl. ¶ 4. Based on Hennighan's inactivity for about two months, Roth contacted Insphere's corporate office in April 2012 to initiate termination of Hennighan's contract. Id. Roth claims that his decision was not influenced by Hennighan's complaint to the California Labor Commissioner and he is not sure he was even aware of Hennighan's complaint when he initiated the termination. Id. On April 26, 2012, Insphere sent Hennighan a contract termination letter based on Roth's recommendation. Roth Decl. ¶ 5; Smith Decl. Ex. 3. Mark Smith, Insphere's Chief Operating Officer, did not know that Hennighan had filed a complaint against Insphere when he signed the termination letter based on Roth's recommendation. Smith Decl. ¶ 2.
Hennighan filed this action in the Superior Court of California, County of Santa Clara, on January 22, 2013, and it was removed to this Court on February 13, 2013. Dkt. No. 1. After several motions to dismiss and various stipulations, Insphere remains the sole defendant. The Second Amended Complaint contains the following causes of action: (1) unlawful discharge, discrimination, and retaliation under California Labor Code Sections 98.6 and 1102.5; (2) wrongful termination in violation of public policy codified in California Labor Code Sections 98.6, 1102.5, 204, 226, 226.7, 227, 510, 512, 1194, and 2802 and Business and Professions Code Section 17200; (3) failure to immediately pay wages upon discharge under California Labor Code Section 201; (4) failure to make agreed upon vacation payments under California Labor Code Sections 227 and 227.3; (5) failure to provide itemized wage statements under California Labor Code Section 226; (6) failure to provide meal and break periods under California Labor Code Sections 226.7 and 512; (7) failure to pay overtime wages under California Labor Code Sections 510 and 1194; (8) failure to indemnify work-related expenditures under California Labor Code Section 2802; (9) unlawful, unfair, and fraudulent business practices under Business and Professions Code Section 17200 as evidenced by violation of public policy and California Labor Code Sections 98.6, 1102.5, 204, 226, 226.7, 227, 510, 512, 1194, and 2802; and (10) violations warranting penalties under the Private Attorneys General Act of 2004, California Labor Code Sections 2698 and 2699.
On March 12, 2014, Insphere filed a motion for summary judgment on all causes of action. Dkt. No. 59. On the same day, Hennighan filed a motion for
partial summary judgment on the issue of his classification. Dkt. No. 65. A hearing on the motions ...