Northbrook-based Allstate Insurance has agreed to pay $4.5 million to 90 former agents who alleged the company’s move to turn employee agents into independent contractors disparately impacted older agents and violated the Age Discrimination in Employment Act (ADEA).
When Allstate initiated the program, it paid severance packages to a group of agents, most of whom were over age 40. None of the agents who received a severance package was eligible to be rehired as an employee for one year.
The agents’ argument relied on a 2005 case—Smith v. City of Jackson—in which the U.S. Supreme Court ruled that claimants could allege disparate impact discrimination in ADEA cases. Disparate impact discrimination occurs when an apparently neutral policy disproportionately hurts a protected group more than other groups.
In the Allstate case, the policy allegedly affected workers over age 40 more than younger workers.
Allstate agreed to settle the case without admitting any wrongdoing. That means no court will ever rule on the legality of Allstate’s actions during the reorganization.
Splitting the money will be agents the company refused to rehire or who did not apply because they knew of Allstate’s apparent moratorium on hiring older agents.
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