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Brief history of the R3001 Exclusive Agent agreement

IC v. Employee

Brief history of the R3001 Exclusive Agent agreement


Prior to rolling out its independent contractor captive agent agreement (R3001) in 1990, Allstate submitted a request to the IRS for a ruling on the classification status of the proposed Exclusive Agent for Federal Tax Purposes. On June 23, 1989, the IRS issued Private Letter Ruling number 8925018 in response to the November 15, 1988 request. Download a copy of the redacted transcript here: Private Letter Ruling #8925018

In mid-1990, Allstate began hiring agents under its new IC agreement. Scratch agents started on an 18-month employee contract (R3000). Agents successfully completing the requirements during the 18-month employee phase were offered the R3001 (for sole proprietors) or R3001A (for corporations) contract. The R3000 employee phase was eventually eliminated.

From 1990 until 2000, agents previously hired under an employment contract were allowed to continue their careers as captive agents under their employee agreement (R830 or R1500). Employee agents had the option convert to the R3001/R3001A agreement voluntarily based on meeting certain conditions which varied from time to time, as set by Allstate.

In November 1999, Allstate declared its “Preparing for the Future” initiative, announcing the employment of virtually* all remaining employee agents would be terminated by June 1, 2000. Agents would be required to sign a release and waiver in order to have the option of continuing to operate as an Allstate captive agent and retain the renewal commission interest in the book of business established as an employee agent. To stay on, agents would have to convert to the newly revised versions of the independent contractor agreements – the R3001S (for sole proprietors) or R3001C (for corporations). (The most noteworthy revision to the “new” contract was the TPP provision.) All future hires would also be hired on the R3001S/R3001C versions.

Of the 6,171 agents whose employment was terminated, approximately 3,772 agents converted to the independent contractor agreement. 2,399 separated from service.

The “Preparing for the Future” initiative prompted many lawsuits. NAPAA filed its one and only lawsuit against Allstate in United State District Court in Florida. Another well-known case which has yet to be settled (as of 2017) is Romero vs Allstate.

Since the mass conversion of employees to independent contractors in 2000, many agents contend they have been misclassified and that Allstate does not treat agents as independent contractors – or in the manor it described in its private letter ruling request. The company has evaded the financial burdens of an employee agent work force without giving up the complete domination and control of its workers. Agents have been deprived of employee benefits and protections including workers compensation, unemployment benefits, wage and overtime regulations, discrimination protection, and ERISA standards for the TPP which replaced the Agent Pension Plan.

*Preparing for the Future did not apply to agents in New Jersey, West Virginia and Montana.
*California agents had undergone a mass termination of employee agents in that state only in 1996

NAPAA has provided this notice for informational purposes only. The contents of this notice should not be construed as legal advice or an endorsement from NAPAA or its attorneys, and NAPAA expressly disclaims any such advice.

The views expressed by NAPAA, or any of its positions relative to its activities and those of its members’ actions on behalf of this organization, are expressly those of NAPAA, and do not reflect the views or opinions of Allstate Insurance Company, or any of its affiliates.