Barnhart v. New York Life Ins. Co.

• Decision Date: 15 April 1998
• Docket Number: No. 96-36148,96-36148
• Citation: 141 F.3d 1310
• Parties: 21 Employee Benefits Cas. 2953, 98 Cal. Daily Op. Serv. 2754, 98 Daily Journal D.A.R. 3793, Pens. Plan Guide (CCH) P 23942F Thomas A. BARNHART, husband; Nancy J. Barnhart, wife, Plaintiffs-Appellants, v. NEW YORK LIFE INSURANCE COMPANY, a New York corporation; New York Insurance and Annuity Corporation, a Delaware corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1310

141 F.3d 1310

21 Employee Benefits Cas. 2953, 98 Cal. Daily

Op. Serv. 2754,

98 Daily Journal D.A.R. 3793,

Pens. Plan Guide (CCH) P 23942F

Thomas A. BARNHART, husband; Nancy J. Barnhart, wife, Plaintiffs-Appellants, v. NEW YORK LIFE INSURANCE COMPANY, a New York corporation;

New York Insurance and Annuity Corporation, a

Delaware corporation, Defendants-Appellees.

No. 96-36148.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 6, 1998.

Decided April 15, 1998.

Robert L. Parlette, Davis, Arneil, Dorsey, Kight & Parlette, Wenatchee, Washington, for plaintiffs-appellants.

Elizabeth Bryson, New York City; C. William Bailey, Mills Meyers Swartling, Seattle, Washington, for defendants-appellees.

Rita M. Theisen, LeBoeuf, Lamb, Green & MacRae, L.L.P., Washington, DC; for Amicus Curiae American Council of Life Insurance.

Appeal from the United States District Court for the Eastern District of Washington (Spokane); Robert H. Whaley, District Judge, Presiding. D.C. No. CV-95-00090-RHW.

Before: SCHROEDER, ALARCON and HAWKINS, Circuit Judges.

ALARCON, Circuit Judge:

Plaintiffs, Thomas A. Barnhart ("Barnhart") and Nancy J. Barnhart, appeal from the grant of summary judgment in favor of defendant, New York Life Insurance Company ("New York Life"), and the dismissal of this action. Barnhart acted as an insurance agent for New York Life until New York Life terminated Barnhart's contract. Barnhart claims that New York Life 1) violated Barnhart's rights under the Employment Retirement Income Security Act ("ERISA") and the Age Discrimination Employment Act ("ADEA"), and 2) breached its contract with Barnhart. We affirm because the record shows that Barnhart was an independent contractor and New York Life terminated Barnhart's contract in accordance with its express termination provision.

I

In 1978, Barnhart entered into a "Field Underwriter's Contract" (the "Contract") with New York Life, which authorized Barnhart to sell insurance policies on behalf of New York Life and provided the terms of commission he would receive for these sales. The Contract provided no termination date but instead contained a provision allowing either party to terminate the Contract with or without cause with thirty days written notice.

In 1993, Paul Colgan ("Colgan"), New York Life's general manager of the Yakima office in Washington, imposed minimum production standards on sales for all New York Life agents in that region. Colgan informed Barnhart that he would be required to meet these standards starting in 1993 or Colgan would recommend that Barnhart's contract with New York Life be terminated. Barnhart failed to meet these standards in 1993 or in the first quarter of 1994. In accordance with Colgan's recommendation, New York Life sent Barnhart a termination letter dated April 27, 1994. The letter informed Barnhart that his contract with New York Life was terminated under section nine of the Contract and stated Barnhart's effective termination date as May 27, 1994, thirty days from the date of this letter.

Barnhart filed an action against New York Life in a Washington state court. New York Life removed the action to federal court. The district court determined that because Barnhart was an independent contractor he could not bring claims under ERISA or the ADEA. The court also held that New York Life did not breach its contract with Barnhart because it merely invoked its right to terminate under an express provision in the Contract. Barnhart has filed a timely appeal.

II

Barnhart contends that there are genuine issues of material fact as to whether Barnhart was an independent contractor or employee under ERISA and the ADEA. We review a grant of summary judgment de novo. Covey v. Hollydale Mobilehome Estates, 116 F.3d 830, 834 (9th Cir.1997).

A claimant under ERISA and the ADEA must establish himself as an "employee." See 29 U.S.C. § 623(a) (ADEA); Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 320-21, 112 S.Ct. 1344, 1346-47, 117 L.Ed.2d 581 (1992) (discussing requirement under ERISA); Frey v. California, 982 F.2d 399, 401-02 (9th Cir.1993) (discussing requirement under the ADEA). The term "employee" is defined in ERISA and the ADEA as "any individual employed by an employer." 29 U.S.C. § 1002(6) (ERISA); 29 U.S.C. § 630(f) (ADEA). In Darden, the Supreme Court adopted a common-law agency test expounding several equally weighted factors to be assessed in determining who qualifies as an "employee" for purposes of ERISA. 503 U.S. at 323, 112 S.Ct. at 1348. The purpose of the test is to determine the extent to which the hiring party controls "the manner and means by which the product is accomplished." Id. The factors include:

1) the skill required; 2) source of the instrumentalities and tools; 3) location of the work; 4) duration of the relationship between the parties; 5) whether the hiring party has the right to assign additional projects to the hired party; 6) the extent of the hired party's discretion over when and how long to work; 7) the method of payment; 8) the hired party's role in hiring and paying assistants; 9) whether the work is part of the regular business of the hiring party; 10) whether the hiring party is in business; 11) the provision of employee benefits; and 12) the tax treatment of the hired party.

Darden, 503 U.S. at 323-24, 112 S.Ct. at 1348-49.

Although the Supreme Court did not specifically address the ADEA in Darden, we find no reason to deviate from the common-law test for purposes of determining employee status under the ADEA. See Speen v. Crown Clothing Corp., 102 F.3d 625, 631 (1st Cir.1996) (adopting the common-law test "for determining who qualifies as an 'employee' under the ADEA" and disregarding decisions to the contrary in other circuits); Frankel v. Bally, Inc., 987 F.2d 86, 90 (2d Cir.1993) (holding that determination of whether someone is an employee under the ADEA must be made "in accordance with common law agency principles"); but see Mangram v. General Motors Corp., 108 F.3d 61, 62 (4th Cir.1997) (applying the hybrid test as adopted in previous cases); Daughtrey v. Honeywell, Inc., 3 F.3d 1488, 1495-96 (11th Cir.1993) (finding it unnecessary to decide which test to apply in determining whether a claimant is an employee under the ADEA because both the common-law test and the hybrid test focus on the hiring party's control).

Barnhart argues that at the very least his status with New York Life is a hybrid between that of independent contractor and employee. Barnhart fails to point to any provision within ERISA or the ADEA that provide protection for someone who can demonstrate only some characteristics of an employee. In this sense, the law provides an all or nothing approach. Either Barnhart is an employee and thus entitled to the protection of ERISA and the ADEA, or he is not. The material facts regarding Barnhart's relationship with New York Life are not in dispute. An application of the common-law factors supports the conclusion that Barnhart is an independent contractor.

There are factors that support the existence of an employment relationship between Barnhart and New York Life. New York Life provided benefits such as life insurance, pension benefits, and a 401K program, which are usually associated with employment. The relationship was long term, lasting sixteen years. New York Life retained the right to terminate Barnhart's contract at-will. The unilateral imposition of minimum standards by New York Life also infers an employer's control. Additionally, New York Life employed Barnhart for three years and during that time trained Barnhart how to be an agent.

Considering all factors as a whole, however, the balance tips in favor of independent contractor status. The contract Barnhart signed contained clear language stating that Barnhart would be considered an independent contractor, not an employee. Consistent with this, Barnhart was free to operate his business as he saw fit without day-to-day intrusions. After the first three-year term of employment, Barnhart was paid commission only. Barnhart's tax returns indicate that he received most of his income from self-employment. Additionally, Barnhart was not dependent solely upon New York Life for his income. Barnhart admittedly sold competitors' products. In light of these facts, we conclude that Barnhart was not an employee of New York Life for purposes of ERISA and the ADEA.

Our conclusion is bolstered by the fact that other courts have categorized insurance agents as independent contractors. See, e.g., Birchem v. Knights of Columbus, 116 F.3d 310 (8th Cir.1997) (applying the common-law agency test to determine that an insurance agent is an independent contractor and therefore not entitled to receive protection as an employee under the Americans with Disabilities Act); Oestman v. National Farmers Union Ins. Co., 958 F.2d 303, 305-06 (10th Cir.1992) (applying hybrid test, but relying on similar factors in determining that an insurance agent was an independent contractor and not an employee under the ADEA).

Barnhart urges us to alter the requirement that claimants under ERISA and the ADEA must be employees. Barnhart relies on the Washington Supreme Court's decision in Marquis v. City of Spokane, 130 Wash.2d 97, 922 P.2d 43 (1996) (en banc), in asserting that an independent contractor should be provided protection under ERISA and the ADEA. In Marquis, the court interpreted the Revised Code of Washington ("RCW") § 49.60.030 as not limited to employees. The court held that "an independent contractor may bring an action for discrimination in the making or performance of a contract for personal services...." Id. at 45.

Barnhart argues that the policy behind this decision should lead us to a similar conclusion with respect to ERISA and the ADEA. We are not persuaded. The decision in Marquis is one of statutory interpretation that is specific to the RCW and as such the analysis in that case is inapplicable...