Five former insurance sales reps who sued an Australian insurer claiming they were employees, not contractors, could have legal fees which outstrip any potential compensation. Plus, if the insurer successfully appeals, they could be facing massive losses…
Last month, Combined Insurance (now owned by ACE Insurance) was fined $10,000 and ordered to pay compensation to five former insurance sales representatives for accrued leave entitlements and interest after the Federal Court found that the former agents were employees.
However, a further ruling this week determined the question of whether the former agents are entitled to their costs of the litigation. The Court upheld ACE’s argument (ACE taking over the proceedings after it acquired Combined Insurance) that no costs are payable in respect of the former agents’ employment claims – as there is a no-costs regime under the Workplace Relations Act 1996. The agents argued to the contrary, but failed.
The Court also made costs orders regarding other arguments which ran at trial. There are costs orders in favour of ACE which the insurer believes cancel out cost orders made in favour of the former agents – effectively resulting in the agents not being entitled to any costs. ACE understands that, after litigating for a number of years, the agents’ legal costs greatly exceed the amounts awarded to the former agents.
After deductions for tax, it appears that the agents are entitled to a total of approximately $200,000 to share between them. The former agents were seeking an amount significantly in excess of this, according to ACE.
Worse still for the agents, ACE are appealing the decision and do not have to pay the compensation to the agents until the appeal is settled. If ACE’s appeal is then successful, the agents will be left footing their legal bills without any compensation to cover those costs.
For its appeal ACE is maintaining its argument that the former agents were in fact independent contractors while engaged with Combined Insurance. ACE filed its appeal papers on 31 August and is seeking a November hearing date.