Allstate Corp. should pay as much as $2 billion to 6,500 current and former agents who were improperly forced to give up benefits, a suit filed by the U.S. Equal Employment Opportunity Commission contends.
The commission sued Allstate after the second-largest auto insurer refused to "provide appropriate monetary relief" to the agents after they were forced to become independent contractors rather than regular employees with pensions and benefits, a lawyer for the EEOC said.
The commission alleges that Allstate's plan to make its agents sign releases barring them from suing the insurer in connection with the change violated laws against retaliation under the Age Discrimination in Employment Act as well as provisions of the Americans with Disabilities Act. Of the agents affected by the action, 19 didn't sign the waivers and left the company, and the rest signed and became contractors.
"They were not willing to reach a final agreement with us to provide appropriate monetary relief to the 6,500 agents," said Robert Johnson, an attorney in the EEOC's regional office in St. Louis, which is handling the case. The complaint was filed Friday in U.S. District Court in Philadelphia.
The suit seeks back pay and benefits for the 19 former agents and compensatory and punitive damages for the rest, for total damages that could reach $2 billion. About 94% of the 6,500 agents involved were over the age of 40, Johnson said.
Allstate's plan to convert employee agents to contractors was part of a reorganization initiated by Chairman and Chief Executive Edward Liddy in November 1999. Allstate expected to save money by not having to pay for benefits to employee agents, thus becoming more competitive with lower-cost rivals such as Geico Corp. that don't depend on agents. The company already had stopped hiring new employee agents.
"Allstate as a corporation is very disappointed to learn that the EEOC has filed a lawsuit," said William Mellander, a spokesman. "Allstate had hoped to reach a settlement without litigation."
The EEOC's action, which was reported earlier by the New York Times, is timed so that it can be combined with a private class-action suit filed against Allstate in federal court in Philadelphia, the commission's Johnson said.
The private class action was filed by 29 current and former Allstate agents against Allstate and CEO Liddy.
Allstate denies any wrongdoing in connection with either case.