agents now interact with customers the“Allstate way.” Congratulations, You’vebeen trained.The program worked so well for Allstate,they also implemented “MysteryShopping” <strong>and</strong> “Good H<strong>and</strong>s CoverageCheckup®” telephone training programs.These are training classes similar to theone for “First Impressions.” In all cases,the process is designed to meet onlyAllstate’s internally developed goals.All <strong>of</strong> the resulting data is collected forAllstate’s purposes <strong>and</strong> in every case, isused by Allstate to modify the agent’sbehavior.Data Collected to Modify Behavior<strong>of</strong> Independent ContractorsEquals CONTROLSome might argue that Allstate hasevery right to collect marketing datarelating to an agent’s job performance.It is not the collection <strong>of</strong> data that is atissue, it is the resulting punitive actionthat is taken against Allstate’s so-called“independent contractor” agents. Companiesutilizing employees are free tocollect data about customer satisfaction,product satisfaction <strong>and</strong> more. Companiesmay freely interpret the results <strong>and</strong>implement changes to employee behavior,skill sets <strong>and</strong>/or production requirements.Companies that utilize independentcontractors may not collect suchdata, imply or determine deficiencies, orforce their independent contractors tocomply with remedial training to addresssaid deficiencies. Independent contractorsmay not be trained, period.Independent contractors are hired afteran evaluation <strong>of</strong> their demonstratedabilities. Some employers use only aninterview to complete the hiring process.But once contracted, companiesmust implement a “h<strong>and</strong>s <strong>of</strong>f ” approach.Therefore, if Allstate changes its marketingphilosophy or requires a different set<strong>of</strong> skills for its sales force, it must thenincentivize its independent contractorsto implement such a change. Per IRSguidelines, Allstate cannot give its independentcontractor agents’ sales, serviceor skills training. Ever.So no matter how much data Allstatecollects, no matter how bad the news, <strong>and</strong>no matter how much it wants to institutea plan to train its agents, it cannot implementsuch a m<strong>and</strong>atory program withoutputting its favorable tax status at risk.Independent Means Independent,Except at AllstateThe definition <strong>of</strong> “independent” includeswords such as self-governing,autonomous, self-regulating, <strong>and</strong> free.Companies that utilize independentcontractors must not only recognize theprecept <strong>of</strong> the word “independent”, theymust embrace the concept as well. Theautonomy associated with independentcontractor agents has a direct benefit tocompanies that correctly utilize them.Companies like State Farm <strong>and</strong> Nationwide,recognize that penetrating themarket with highly skilled, independentpr<strong>of</strong>essionals is preferred to the employeemethod, if for nothing else because <strong>of</strong>the pride <strong>of</strong> ownership such agents havefor their businesses. Elimination <strong>of</strong> thewage tax, Social Security tax, 401ks, pensions<strong>and</strong> health insurance premiums,give companies who utilize independentcontractors a competitive advantagethrough lower expenses.By slowly blurring the line <strong>of</strong> interactionwith its agents over the past fewyears, Allstate has transitioned them backto an employee-like status. Much like thefrog who hops into a pot <strong>of</strong> water thinkingit a refreshing dip in a pond, Allstateagents signed an “EA Independent ContractorAgreement,” expecting true independentcontractor status. If the temperature<strong>of</strong> the water is raised slowly enough,the unwitting amphibian will never knowhe is being slowly cooked to death untilit is too late. This insidious analogy is exactlywhat Allstate has done to its agents.But, now after nearly ten years <strong>of</strong> subtletransitioning, Allstate feels the temperature<strong>of</strong> the pot needs to be turned up to afull boil. That’s why with ever-increasingfrequency <strong>and</strong> intensity, Allstate has instituteddirect employee controls like quotas,annual employee reviews, m<strong>and</strong>atory callforwarding, m<strong>and</strong>atory <strong>of</strong>fice hours <strong>and</strong>now, m<strong>and</strong>atory training.When a company like Allstate takesadvantage <strong>of</strong> all <strong>of</strong> the tax benefits <strong>of</strong>utilizing independent contractors, butcrosses the line by treating its workers likeemployees, the IRS begins to take notice.It is not smart to try to fool the IRS. Notonly does the IRS have its own plan forcatching tax cheats, it has implementedan association with various state agenciesto enhance its efforts. It is paramount forAllstate agents to not only recognize theyare at “full boil,” it is imperative they dosomething about it. In a previous issue<strong>of</strong> Exclusivefocus, readers were encouragedto send a postcard enclosure to JohnTuzynski at the IRS. That was an excellentstart. Some agents are coalescing intosmaller versions <strong>of</strong> NAPAA <strong>and</strong> holdingtheir own local meetings to discuss theseissues <strong>and</strong> more. It is information sharingthat provides agents their biggest opportunityto defend themselves againstan illegal intrusion <strong>of</strong> their independentcontractor status.Finally, it can be argued that the“First Impressions” program <strong>and</strong> otherslike it will enhance an agent’s businessoperation <strong>and</strong> aid in developing a pr<strong>of</strong>itableagency. It is not the intention <strong>of</strong>this article to denigrate viable assistanceprograms so long as they are voluntary.Because the programs exist at all is afunction <strong>of</strong> the necessity to address bothcompetition <strong>and</strong> the changing requirements<strong>of</strong> our customers. No one wouldbegrudge an employer for anticipating acertain type <strong>of</strong> return from its employeesafter investing in a new marketing campaignor a training program. But becauseAllstate claims that its agents are “independentcontractors,” there are certainemployee-like practices it must avoid, ifit wants to maintain its status with theIRS. Currently, Allstate enjoys favorabletax treatment because it classifies us as“independent contractors.” This meansAllstate must operate with a differentset <strong>of</strong> rules to achieve its corporate expectations.Looking back, it is clear thatAllstate never really adjusted to the independentcontractor model. The thought<strong>of</strong> relinquishing its control over thous<strong>and</strong>s<strong>of</strong> agents probably scared the hellout <strong>of</strong> senior managers. So instead, Allstatesimply reverted to its old employeeprogram mere months after convertingits agents to independent contractor status.It is the compilation <strong>of</strong> each employeecontrol, including m<strong>and</strong>atory trainingthat has now removed any vestige <strong>of</strong> independencefor Allstate agents.50 — Exclusivefocus Summer 2009
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