Allstate Canada’s attempts to cut costs by consolidating offices has left it facing a $60 million class-action lawsuit from some of its former agents.
On July 24, 2007, the insurance company announced it would be moving its 450 agents from 256 neighbourhood offices across Canada into 100 larger offices, beginning in May 2008. Most agents weren’t pleased, particularly senior agents, some of whom ran the neighbourhood offices as their own businesses, handling the hiring of staff and management of finances. However, under the consolidation, the 100 new offices will be owned and run by Allstate.
The consolidation also outlined significant changes to the contract terms of the agents, including taking away sales commissions on policy renewals. Allstate said it would guarantee agents’ level of pay for two years, but most didn’t bite as the changes would result in overall pay cuts for many, some by as much as 50 per cent.
Agents tried to discuss the situation with the company but it wouldn’t budge from its position.
More than 70 agents have since quit, though Allstate told the
it had hired sufficient replacements. When some tried to continue working with clients as independent brokers, Allstate sued them for breaching non-compete agreements they had signed.
However, in March, the Ontario Superior Court of Justice found the agreements weren’t valid, considering the way Allstate and changed their contract terms and ruled the company couldn’t enforce them.
On May 20, three agents, Mark Cassels of Hamilton, along with Esther Kafka and Ken Patel of Windsor, launched a class action lawsuit on behalf of all the agents for making “substantive material changes to the employment contract terms with all of its sales agents,” which was a breach of contract and the
Employment Standards Act
. They also claimed Allstate’s guarantee of their level of income for two years was unlikely to be borne out.
The case hasn’t been heard yet, but in the March decision that struck down the non-compete agreements, the court said there was a good chance Allstate will be found to have repudiated its employment contracts with the changes.
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