United States District Court, D. New Jersey
WILLIAM J. MARTINI, U.S.D.J.
Fred Walfish (“Plaintiff” or
“Walfish”) is an insurance agent who was
associated with Defendants Northwestern Mutual Life Insurance
Company and Northwestern Mutual Investment Services
(together, “Defendants” or
“Northwestern”) for nearly twenty years. On
August 15, 2016, Plaintiff filed a one-count putative class
action complaint alleging that Northwestern's method of
compensating agents violates the New Jersey Wage Payment Law
(“NJWPL”). ECF No. . According to the
complaint, Defendants misclassified him and other insurance
agents as independent contractors and deducted certain
expenses from their commissions in violation of the NJWPL.
Id. at 57- 58.
Defendants' request to brief summary judgment prior to
class certification was granted, see ECF No. ,
the parties cross-moved for summary judgment, ECF Nos. 
and  (“Motions”), on Plaintiff's
individual claim. The Court has reviewed the Motions and all
papers filed in support and opposition, and no oral argument
was held pursuant to Federal Rule of Civil Procedure 78. For
the reasons set forth below, Defendants' Motion for
Summary Judgment is GRANTED and
Plaintiff's Motion for Partial Summary Judgment is
following facts are undisputed unless otherwise noted.
Defendant Northwestern Mutual Life Insurance Company is a
life insurance company headquartered in Milwaukee, Wisconsin.
Plaintiff's Counterstatement of Material Facts, ECF No.
[66-2] ¶ 1. Defendant Northwestern Mutual Investment
Services, LLC is its wholly owned broker/dealer. Riedl Tr. at
6-8. Defendants' core business is underwriting, issuing,
and servicing insurance policies. ECF No. [66-2] ¶ 2.
Defendants do not sell their products from headquarters in
Wisconsin nor through direct marketing, bank affiliations, or
the internet. Id. ¶ 4. Instead, Defendants use
a “General Agency” sales model in which an
independent contractor known as a “General Agent”
operates a local field sales office. Id.
¶¶ 5-7. The general agent, in turn, enters into
contractual arrangements with individual sales agents termed
“Special Agents” or “Financial
Representatives.” Id. As an alternative to
this model, under certain circumstances, the Northwestern may
appoint a representative of the company to “operate the
local agency” as a “cashiership.”
Id. ¶¶ 8-9; see ECF No. [66-15]
at 6. Whether the local field office is operated by a general
agent or as a cashiership, financial representatives are
generally responsible for developing their own client lists
and soliciting applications for insurance. ECF No. [66-15] at
1996 to 2016, Plaintiff was a Northwestern financial
representative. In early 2010, Plaintiff entered into a
superseding “Full-Time Special or Soliciting
Agent's Contract” effective February 1, 2010 with
the Seery Financial Group LLC, a general agency owned and
operated by general agent Robert Seery (“the Seery
Agency”). Id. ¶ 11. Plaintiff also
entered into an “Amendment” to that agreement on
January 22, 2010. See ECF No. [66-15], [72-2]
(together, with the Full-Time Special or Soliciting
Agent's Contract, “the Walfish Contract”).
The Walfish Contract includes the following provisions:
4. Relationship - Agent shall be an
independent contractor and nothing herein shall be construed
to make Agent an employee of the Company [Northwestern],
General Agent [Robert Seery], or First Party [Seery Agency].
Agent shall be free to exercise his own judgment as to the
persons from whom he will solicit Applications and the time,
place and manner of solicitation, but the Company from time
to time may adopt regulations respecting the conduct of the
business covered hereby, not interfering with such freedom of
action of Agent.
6. Exclusive Dealing - (a) the Agent agrees
to submit to the Company for approval all Applications
secured by him/her for life insurance, annuity contracts or
disability income insurance policies, except Applications
with respect to persons who are then insured by the Company
to the limit which it will issue on them or who are otherwise
not acceptable for insurance by the Company or who have been
found by the Company to be insurable only at higher than
standard premium rates which are unacceptable to the
applicants. However, this provision shall not apply to
Applications for Section 79 group term life insurance,
individual or group health insurance, credit life, liability,
fidelity, surety and travel accident insurance or mutual fund
shares. Agent is deemed to be a full-time life insurance
salesperson and is expected to concentrate his/her sales
efforts on behalf of the Company.
8. General Duties - Agent shall solicit
Applications within the territory, and shall procure the
issuance of life insurance policies and annuity contracts in
an aggregate amount and on a number of lives satisfactory to
the First Party and at least equal to the minimum
requirements established by Company for licensure. He shall
collect the initial premiums on such policies and contracts.
. . .
13. Expenses - Agent shall pay all expenses
incurred by him in the performance of this agreement.
14. Conduct - Agent shall comply with all
applicable laws and regulations and shall so conduct himself
as not to affect adversely the business, good standing or
reputation of himself, the First Party, or the Company.
[66-15] at 2-3. The Walfish Contract also sets forth the
terms for payment of Plaintiff's commissions and for
termination of the agreement. Id.
2010 to 2016 (the “Relevant Time Period”),
Plaintiff sold insurance under this contract and filed taxes
as a sole proprietorship called “Fred Walfish
Insurance.” ECF No. [66-2] ¶ 14; 87-92; see
also ECF Nos. [61-10], [61-13]. During this time, he
characterized himself as an “outside salesman”
who sold both Northwestern policies and policies of
approximately twenty other companies to “[his]
clients.” Walfish Tr. at 30-32, 35-36, 96, 103. Some
years Plaintiff received significantly more income from
non-Northwestern products, and in some years, he received a
larger percentage of his income from Northwestern products.
ECF No. [66-2] ¶¶ 52-56; 87-90; see also
[61-10], [61-13]. However, the record reflects that his
Northwestern commissions comprised no more than one-third of
Plaintiff's overall annual commission compensation during
the Relevant Time Period. ECF No. [66-2] ¶ 55.
testified that within his assigned territory he had no
restrictions on which clients he pursued or for which clients
he submitted applications. Id. 35-36; see
also ECF No. [66-2] ¶ 28. Rather, Plaintiff was
required to develop his own prospects and client lists, and
no clients were provided to him by Northwestern. ECF No.
[66-2] ¶ 29. Plaintiff testified that Northwestern
approved his clients' applications before issuing
insurance products and that Plaintiff was contractually
required to recommend Northwestern products over a similar
competitor's product, unless the competitor's product
was in the client's best interest. Id. ¶
30. At times during the Relevant Time Period, a significant
portion of Plaintiff's sales were for products in which
Northwestern had no offerings, such as health insurance
policies. Walfish Tr. at 829-30.
was expected to meet certain minimum sales levels. ECF No.
[66-2] ¶ 87. Both Plaintiff and other deposed
witnesses from Northwestern testified that failure to meet
those minimums would not necessarily result in termination of
a financial representative's contract, but rather could
also result in a waiver of the minimums, a probationary
period, or a monetary penalty. Id. ¶ 87;
see also [61-16] at passim and Walfish Tr.
at 229-31, 241. Plaintiff further testified that he was
required to keep certain records regarding the suitability of
his product recommendations; to maintain his work email
signature, business cards, and voicemail with accurate
information; to complete certain continuing education and
compliance requirements; to attend an annual compliance
review and annual staff meeting; and to comply with a
“Field Compliance Manual.” Id.
¶¶ 22, 28, 34-35.
the Relevant Time Period, Plaintiff rented an office from
either the Seery Agency or its successor cashiership.
Plaintiff testified that “I can't give you any kind
of a routine that I kept in terms of being in and out of the
office, ” spent “plenty” of days out of the
office, had “not a clue” how much time he spent
in his rented space. Walfish Tr. at 94, 96-101. The parties
agree that Plaintiff determined his own schedule, scheduled
his own appointments, and maintained his own calendar. ECF
No. [66-2] ¶ 40. Plaintiff testified that he generally
met with clients outside of the office, usually at their
homes or place of business, and often worked from home. ECF
No. [66-2] ¶¶ 30-34. His tax returns during the
Relevant Time Period reflect tens of thousands of dollars in
deductions on his Form 1040 Schedule C for “Fred
Walfish Insurance” for rent, office supplies, mileage,
dining expenses, telephone costs, repairs and maintenance.
See ECF Nos. [61-10], [61-13]. Plaintiff testified
that was impossible to separate expenses he had from selling
Northwestern products from the overall operation of Fred
Walfish Insurance. ECF No. [66-2] at 24.
month, Defendants generated statements which reflected the
commissions from the products financial representatives sold.
See, e.g., Walfish Tr. at 561-62. Defendants then
transmitted all gross commissions to the general agent for
that month, and the agency in turn recorded these commissions
on an internal ledger system for each financial
representative. ECF No. [66-2] ¶ 72. Plaintiff's
commissions and expenses, including rent, office supplies,
and licensing fees, as well as his “expense override,
” that is, an additional percentage provided by the
general agency based on Plaintiff's sales, were reflected
on his internal ledger account. ECF No. [66-2] ¶ 64, 78.
Plaintiff testified that he understood that these positive
and negative credits were reflected on his account, and for
his twenty-year association with Northwestern Plaintiff was
paid based on the balance as reflected in this account.
Id. ¶¶ 64-69, 74; Walfish Tr. at 105,
77-85, 96-100. Plaintiff took deductions on his tax returns
for the expenses recorded in the account as unreimbursed
business expenses. ECF No. [66-2] ¶ 77. During the
Relevant Time Period Plaintiff was compensated based on this
system and made his minimum sales requirements each year from
1996 to 2014. In 2015, Plaintiff missed his minimums. Walfish
Tr. at 625-26.
2016 Plaintiff was no longer associated with Northwestern.
While the parties disagree regarding the reasons that
Plaintiff's contract terminated, Plaintiff testified at
his deposition that after his association with Northwestern
Mutual concluded, he continued to sell insurance to his
clients and operate Fred Walfish Insurance, but no longer
sold Northwestern products. ECF No. [66-2] ¶ 63; Walfish
Tr. at 43-56, 69-70.
on these facts, on August 15, 2016, Plaintiff filed his
one-count putative class action complaint alleging violations
of the NJWPL. ECF No. . Plaintiff alleges that despite his
contractual classification as an independent contractor,
Defendants actually exercised substantial control over the
performance of his work requiring him to be classified as an
“employee” and entitling him to certain wage
protections found in the NJWPL. Plaintiff alleges the
following control over his work: (1) minimum earnings
requirements and control over compensation schedule, (2)
exclusive dealing which required Plaintiff to preference
Northwestern polices, (3) requirements regarding approval for
outside or consulting work, (4) requirements regarding
content of marketing material, (5) requirements regarding the
maintenance of records and adherence to compliance guidance,
and (6) various requirements regarding electronic device
access, use of email, and retention of electronic documents.
Id. ¶¶ 24-56. Plaintiff brings his NJWPL
claim on behalf of himself and all persons who worked in New
Jersey as insurance agents, special agents, soliciting
agents, registered representatives financial representatives
. . . for Defendants at any time on or after [August 15,
2010].” Id. ¶ 10. Defendant answered, ECF
No. , and discovery ensued. On September 13, 2018, The
Honorable Mark Falk, U.S.M.J., granted Defendants permission
to move for summary judgment before Plaintiff moved for class
certification. The Motions followed. ECF No.  & .
their moving brief, Defendants make three general arguments
in favor of their position that Plaintiff is an
“independent contractor” and not an
“employee” under the NJWPL, and therefore not
entitled to its protections. Specifically Defendants argue
(1) that the Court should read the NJWPL to incorporate an
enumerated exclusion for insurance agents found in the New
Jersey Unemployment Compensation Act (“NJUCA”);
(2) that the undisputed facts demonstrate Plaintiff's
relationship with Defendants meets the “ABC Test”
for classification as an independent contractor applicable
under New Jersey law; and (3) even if the Court were to find