Murray v. Principal Financial Group, Inc.
2010 U.S. App. LEXIS 15327, 93 Empl. Prac. Dec. (CCH) 43,951, 613 F.3d 943 (2010)
Rule of Law:
The Darden common law agency test, which focuses on the hiring party's right to control the manner and means by which the work is accomplished, is the controlling standard for determining whether an individual is an 'employee' or an 'independent contractor' under federal employment statutes like Title VII when the statute defines 'employee' circularly.
Facts:
- Patricia Murray worked as a 'career agent' for Principal Financial Group, Inc., Principal Life Insurance Company, and Princor Financial Services Corporation (collectively 'Principal').
- Murray and other Principal career agents sold a wide range of Principal's financial products and services, including annuities, disability income, 401(k) plans, and insurance.
- Murray operates her business by deciding when and where to work, maintaining her own office for which she pays rent, and scheduling her own time off without being entitled to vacation or sick days.
- Murray is compensated solely on commission, reports herself as self-employed to the IRS, and in limited circumstances, sells products from companies other than Principal.
- Murray has a long-term relationship with Principal, operates under an at-will contract, and receives some benefits.
- Principal imposes some minimum standards on Murray's work.
Procedural Posture:
- Patricia Murray sued Principal Financial Group, Inc., Principal Life Insurance Company, and Princor Financial Services Corporation in the United States District Court for the District of Arizona, alleging sex discrimination in violation of Title VII.
- The district court granted summary judgment in favor of Principal, holding that Murray was an independent contractor and not an employee under Title VII.
- Murray appealed the district court's decision to the United States Court of Appeals for the Ninth Circuit.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Is Patricia Murray, a 'career agent' for Principal Financial Group, Inc., an 'employee' within the meaning of Title VII, thus entitling her to the protections of the statute, or is she an 'independent contractor'?
Opinions:
Majority - Judge Schroeder
No, Patricia Murray is not an 'employee' within the meaning of Title VII, but rather an independent contractor, and therefore is not entitled to the statute's protections. The Ninth Circuit clarified that the proper test for determining 'employee' status under Title VII, where the statute defines 'employee' circularly, is the common law agency test as articulated by the Supreme Court in Nationwide Mutual Insurance Co. v. Darden. This test focuses on 'the hiring party’s right to control the manner and means by which the product is accomplished' and identifies twelve factors for consideration. The court noted that its previous formulations (the 'economic realities' test and the 'common law hybrid' test) are functionally indistinguishable from Darden, but Darden's common law test must control. Applying the Darden factors, the court found Murray's situation 'virtually indistinguishable' from Barnhart v. New York Life Ins. Co., where an insurance agent was deemed an independent contractor under similar federal statutes. Factors strongly indicating independent contractor status for Murray include her freedom to operate her business (deciding when/where to work, maintaining her own office, scheduling time off), being paid solely on commission, reporting as self-employed for tax purposes, and selling other companies' products in limited circumstances. While some factors like receiving benefits, a long-term relationship, and being subject to minimum standards suggest employee status, the balance of factors, even resolving factual disputes in Murray’s favor, overwhelmingly points to her being an independent contractor because Principal does not control the manner and means by which she sells their financial products.
Analysis:
This case is significant for clarifying the uniform application of the Nationwide Mutual Insurance Co. v. Darden common law agency test to determine 'employee' status under federal employment statutes like Title VII in the Ninth Circuit, particularly when the statutory definition of 'employee' is circular. By explicitly stating that previous 'economic realities' or 'common law hybrid' tests are functionally equivalent or superseded by Darden, the Ninth Circuit provided clear guidance to lower courts. The decision reinforces the difficulty for commissioned agents, like insurance or financial product sellers, to be classified as employees due to the inherent autonomy in their work structure, potentially limiting the scope of Title VII protection for such workers across various industries.
