agent issuesWho Controls <strong>Allstate</strong> <strong>Agents</strong>?<strong>Allstate</strong>, <strong>of</strong> Course!SUBMITTED BY AN ALLSTATE AGENTLet’s begin with a definition <strong>of</strong> theterm “adhesion contract.” Accordingto Law.com it is described as follows:“adhesion contract, n. (contract <strong>of</strong> adhesion)a contract (<strong>of</strong>ten a signed form) soimbalanced in favor <strong>of</strong> one party over theother that there is a strong implication itwas not freely bargained. Example: a richlandlord dealing with a poor tenant whohas no choice and must accept all terms<strong>of</strong> a lease, no matter how restrictive orburdensome, since the tenant cannot affordto move.”Contracts are used to codify a relationshipbetween two or more entities.Adhesion contracts are used when thecontrolling party does not want negotiationto be part <strong>of</strong> the contract signingprocess. They are <strong>of</strong>ten used by employerswhen there is a desire for a heightenedlevel <strong>of</strong> control over workers. Thistype <strong>of</strong> contract is also known as a “takeit or leave it” type <strong>of</strong> contract. Tenured<strong>Allstate</strong> agents are familiar with this type<strong>of</strong> contract and will recall the method<strong>of</strong> conversion from their prior status asemployees. The “take it or leave it” EAcontract was presented during countrywide“take it or leave it” meetings. Neweragents will recall their hiring process alsoincluded the “take it or leave it” presentationbut in a much more benign setting.Regardless <strong>of</strong> the method, current <strong>Allstate</strong>Exclusive <strong>Agents</strong> all have signed anadhesion contract.Tenured agents will also rememberthat when transitioning from employee to“independent contractor” there was greatemphasis placed on the value <strong>of</strong> the investmentagents had accrued in their book<strong>of</strong> business. Managers quickly remindedagents (rich landlord, poor tenant) that ifthey did not accept the new contract theywould be losing hundreds <strong>of</strong> thousands<strong>of</strong> dollars in “equity” they had invested asNOA agents. <strong>Agents</strong> were encouraged toseek legal advice, but were told that theExclusive Agent contract was non-negotiable.But because agents were promised“new freedoms” as true independent contractors,few, if any, attempted to have thecontract reviewed. At the time, very fewagents could afford to walk away from alifetime <strong>of</strong> investment.New agents are presented an updatedversion <strong>of</strong> the “take it or leave it”meetings agents faced in 1999. Because28 — <strong>Exclusivefocus</strong> Spring 2009
negotiation is not part <strong>of</strong> an adhesioncontract, it is the sales pitch behind thecontract that entices new hires to becomeone <strong>of</strong> the “Good Hands” people. Whilepromising independence, prospectivenew hires are routinely misinformed anddeprived <strong>of</strong> critical career-deciding informationby many managers. Typically,the first time they see the EA contractis when they are asked to sign it. Worseyet, the most important document <strong>of</strong> all,the 300 page EA Supplement, is rarely,if ever, furnished before the contract issigned. And from the company’s point<strong>of</strong> view, for good reason. Imagine howmany prospective agents would run forthe hills after realizing the extent <strong>of</strong> thecompany’s controls.New agents <strong>of</strong>ten have already visitedthe <strong>Allstate</strong>.com/careers Web sitewhere they are promised the ability to“run their own business.” Managers dolittle if anything to correct the misperception<strong>of</strong> independence. While it iscertainly the responsibility <strong>of</strong> the personsigning a contract to have full knowledge<strong>of</strong> its contents, it is the misdirection <strong>of</strong> apromise <strong>of</strong> independence that s<strong>of</strong>tens theharshness <strong>of</strong> the <strong>Allstate</strong> “take it or leaveit” contract.It is this promise <strong>of</strong> “delivery,” therefore,that is a key element <strong>of</strong> adhesioncontracts. S<strong>of</strong>tware users will rememberthe acceptance screen that must be acknowledgedbefore a program is activated.And it is doubtful any <strong>of</strong> us have readthe Hertz rental contract while a herd<strong>of</strong> angry travelers awaits its turn behindus. We want the s<strong>of</strong>tware, so we checkthe box; we want the car, so we sign thecontract. No negotiation allowed: takeit or leave it. There are many other examples<strong>of</strong> adhesion contracts that affectour daily lives. It just takes an educatedeye to spot one. The preceding exampleshave been provided to give you a basicunderstanding <strong>of</strong> the concept. However,it is important to understand if a contractis truly an adhesion contract, it will befound unenforceable when challenged,or at least those parts that are deemedunfair or unreasonable.It is easy to see how this type <strong>of</strong> contractcan be used to enforce a high degree<strong>of</strong> control with employees. Performanceexpectations are specified, as are workschedules and required hours <strong>of</strong> employment.But equally important to this type<strong>of</strong> control is the ability <strong>of</strong> the employerto modify the contract thereby exerting awhole different level <strong>of</strong> control. Becauseit is disadvantageous for an employer toconstantly swap contracts, a reference toan addendum or supplement allowingfor change is incorporated into the body<strong>of</strong> the contract. Therefore, an employerneeds only needs to announce a revisionto its supplement to reassert control andremind workers <strong>of</strong> the tenuous “take it orleave it” nature <strong>of</strong> their jobs.When adhesion contracts are usedin conjunction with independent contractors,the all important threshold <strong>of</strong>control must be avoided. In the case <strong>of</strong>the <strong>Allstate</strong> contract, the goodwill valueaccrued after years <strong>of</strong> sweat equity aswell as the actual monetary value, areheld in abeyance unless and until all <strong>of</strong>the terms <strong>of</strong> the contract are agreed to,which amounts to control. Once executed,the constantly changing terms <strong>of</strong>the contract via the Supplement are usedto manipulate performance outcomesand/or to terminate the agent/companyrelationship, yet another example <strong>of</strong> theunbridled control exerted by the company.Remember the rich landlord and thepoor tenant described in the opening <strong>of</strong>the article? Is there any doubt as to therole the <strong>Allstate</strong> agent plays?Independent contractors, by IRSstandards, have to be treateddifferently than employees.Adhesion contracts fit easily into theemployer/employee relationship becausethe employer can rightfully exert employeecontrols. Employers can changework descriptions, work products, andeven require higher or more sophisticatedskill levels for employees to keeptheir jobs. The “take it or leave it” aspect<strong>of</strong> the adhesion contract must be employedjudiciously to keep employee moralein check, but is overwhelmingly thecontract <strong>of</strong> choice by many corporationswho use employees. But this level <strong>of</strong> controlcomes at a price: employer responsibilityfor payroll taxes and liability undervarious statutes aimed at regulating theworkplace are among the trade-<strong>of</strong>fs.Independent contractors who signadhesion contracts are not intentionallytrying to convert themselves to employeestatus. Neither are all employers who useadhesion contracts trying to convert theirindependent contractors to employees. Agood example <strong>of</strong> this is <strong>Allstate</strong>’s closestcompetitor, State Farm. Their agentshave signed an adhesion contract, thebody <strong>of</strong> which contains a mere 6 pages.But that contract cannot be modifiedwithout the consent <strong>of</strong> both the agentand State Farm. It is this bilateral elementthat eliminates the possibility foreither side to exert an unchecked imposition<strong>of</strong> will. Said another way; State Farmcannot exert control over its agents. StateFarm agents have no quotas, no set <strong>of</strong>ficehour requirements, do not have to callforward <strong>of</strong>fice phones, are not required toattend mandatory meetings, and are notgrouped into teams required to achievecorporate goals. The State Farm contractrepresents only a gateway for the agentsto perform their duties, whereas the <strong>Allstate</strong>contract embodies every aspect <strong>of</strong>control found where corporations useemployees.The better, State Farm way.Every “Good Hands” agent is aware<strong>of</strong> the severity <strong>of</strong> the employee controlsthat <strong>Allstate</strong> utilizes. <strong>Allstate</strong> imposesrequired <strong>of</strong>fice hours, annual employeestylereviews, quotas, mandated meetingsand more. After operating under <strong>Allstate</strong>’semployee-style contract for nearlyten years, many agents are beginning toexpress their frustration, as evidenced bythe recent Agency Relationship Survey.But, few, if any, <strong>of</strong> the <strong>Allstate</strong> sales forcerealize there is an alternative to the unilateral,employee agent <strong>Allstate</strong> contract.After reading this article, every agent willknow that there is another contract thatnot only conforms to IRS standards, butis readily used by its closest competitor,State Farm. Printed below are completesections as well as direct excerpted quotesfrom the State Farm Agent Agreement.“PreambleThe purpose <strong>of</strong> this Agreement is to reduceto writing the objectives, obligationsand responsibilities essential to the relationshipbetween the Agent, operating as an independentcontractor, and State Farm. It isSpring 2009 <strong>Exclusivefocus</strong> — 29
Change language