Working Before Being Officially Hired???

[Toolcat]

I just passed my insurance exam and am waiting for my insurance license number to be issued by the state in order to be officially contracted as an agent by a local (very large) insurance company. Eventhough I am not officially contracted and am not getting paid my training salary, the insurance company is asking me to report to the office for training. The companies view is that the training pay is more of a draw and needs to be paid back with sales and so I should get done with training so I can start selling as soon as I am licensed. Does this sound fair? Is this a common practice in the insurance insustry?

 

[Crabcake Johnny]

Check the labor laws. I believe if training is required then you must at least be compensated minimum wage. That said, many companies violate this but to me it goes to the ethics of the company. If you're starting to get a bit of a bad taste in your mouth just imagine after a few months goes by.

 

[scagnt83]

I just passed my insurance exam and am waiting for my insurance license number to be issued by the state in order to be officially hired by a local (very large) insurance company. Eventhough I am not officially hired and am not getting paid, the insurance company is asking me to report to the office for training. The companies view is that the training pay is more of a draw and needs to be paid back with sales and so I should get done with training so I can start selling as soon as I am licensed. Does this sound fair? Is this a common practice in the insurance insustry?

Yes, its common practice with most of the big captive mutual companies (and many others).

Basically, the bonus they give you on top of your commission rate is usually referred to as a "training bonus".
Its for the initial and ongoing training that you will receive.

Generally speaking, in the insurance agent world (especially life insurance), you do not get paid any salary, you get paid for performance. And you have to learn before you can perform.

There are some property and casualty companies that pay agents a small starting salary, but the commissions are usually very low.

What company is it?

 

[VolAgent]

Check the labor laws. I believe if training is required then you must at least be compensated minimum wage. That said, many companies violate this but to me it goes to the ethics of the company. If you're starting to get a bit of a bad taste in your mouth just imagine after a few months goes by.

Read the contract. They take great pains to state that you are an independent contractor and not an employee. As long as they do not violate that status, they can do whatever they want.

 

[Crabcake Johnny]

Independent contractors cannot be compelled to attend training or meetings. Many violators out there - goes to the ethics of the company.

By the way, the contract can state that they're a contractor but the determinant factor is how they're treated.

 

[VolAgent]

I'd say most violations of independent contractor have to do with lack of real understanding versus being intentional.

But if the pay is conditioned on attending training, they certainly can require you to attend to receive the pay. It would be the same as paying someone to paint your house. I can definitely tell you when to show up and paint or refuse to pay you. That doesn't give me the right to tell you what to do with the rest of your time.

 

[Crabcake Johnny]

Can I mandate that the painter attend a class on how to paint then subtract the cost of that class from what I'm going to pay him?

An independent contractor agreement is like the one between me and Golden Rule. I contract through them to sell their products. They do not control my hours. Training is available on their site but not mandatory.

For your review:

http://www.comptroller.ilstu.edu/downloads/20-factor-test-for-independent-contractors.pdf

• Amount of training. Requesting workers to undergo company-provided training suggests an employment relationship since the company is directing the methods by which work is accomplished.

 

[VolAgent]

Don't forget, a lot of the mutuals have the agents classified as statutory employees. A mix of W2 and 1099. They may have an exemption for this.

 

[Crabcake Johnny]

The IRS directly cites your example as a statutory employee - however, the company must withhold social security and medicare taxes. I doubt this is the case with the company in question. I stand by my first post. Based on the information available it would seem that requiring training without pay is illegal.

Statutory Employees

Statutory Employees


If workers are independent contractors under the common law rules, such workers may nevertheless be treated as employees by statute (statutory employees) for certain employment tax purposes if they fall within any one of the following four categories and meet the three conditions described under Social Security and Medicare taxes, below.

A driver who distributes beverages (other than milk) or meat, vegetable, fruit, or bakery products; or who picks up and delivers laundry or dry cleaning, if the driver is your agent or is paid on commission.

A full-time life insurance sales agent whose principal business activity is selling life insurance or annuity contracts, or both, primarily for one life insurance company.

An individual who works at home on materials or goods that you supply and that must be returned to you or to a person you name, if you also furnish specifications for the work to be done.
A full-time traveling or city salesperson who works on your behalf and turns in orders to you from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments. The goods sold must be merchandise for resale or supplies for use in the buyer’s business operation. The work performed for you must be the salesperson's principal business activity.

 

[scagnt83]

An independent contractor agreement is like the one between me and Golden Rule. I contract through them to sell their products. They do not control my hours. Training is available on their site but not mandatory.

This is true. But at most of the captive companies a new agent is considered a statutory employee, not an independent contractor.