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NORTHBROOK, Ill. -- A group of women fired by Allstate Corp. and rehired as leased office workers has launched a class action seeking to recover benefits denied more than 10,000 people who have worked for the insurer on the same basis since 1983.
The suit charges that Allstate orchestrated a paper shuffle by switching to contracted workers to eliminate the corporation's obligation to pay retirement and other benefits.
An Allstate official declined to comment on the suit, saying the insurer hadn't reviewed it yet.
Filed last month in U.S. District Court in Beaumont, Texas, the suit seeks triple damages under the Racketeer Influenced and Corrupt Organizations Act. If it is certified as a class action involving thousands of people, Northbrook, Ill.-based Allstate could face defending hundreds of millions of dollars in claims.
The suit could foreshadow similar exposure for other employers, as more corporations move to cut costs by replacing employees with independent contractors or temporary workers employed by outside staffing companies.
The Allstate suit is patterned after a case in which independent contractors working for Microsoft Corp. were found to have been "common law employees" illegally restricted from participating in its 401(k) retirement plan and lucrative stock purchase program.
"Every large corporation is aware of it," said Robert Pike, Allstate senior vp and general counsel, commenting only on the implications of the Microsoft suit. "We have taken steps to insure that those individuals (independent contract workers) are not part of our welfare or pension plans."
"Much attention has been paid to the Microsoft decision because they got socked with such a dramatic decision and potentially very high damages," said Beverly Garofalo, an employment lawyer at Brown Raysman Millstein Felder & Steiner L.L.P. in Hartford, Conn.
A Microsoft spokesman declined to say how much the decision might cost the Redmond, Wash., software maker, since it is still counting people who fit into the class.
In the Allstate complaint, the six plaintiffs in Texas and Florida charge that in the early 1980s senior executives "directed the heads of Allstate Neighborhood Office agencies to fire and rehire office staff members in order to classify them as leased employees."
By using temporary employees, the complaint argues, Allstate avoided paying benefits and other obligations guaranteed under the Employee Retirement Income Security Act. The suit contends the workers were rehired through Allstate-approved temporary agencies and continued working in the same jobs.
In addition, the complaint alleges that the temporary agencies exercise practically no control over the office staffers.
"In actual practice, the Allstate agent and manager recruits, interviews, assesses, hires, trains, and manages every temporary employee," the complaint says. "In fact, the temporary service usually never even meets the employee."
One plaintiff, Linda Berry, a licensed agent and contracted worker in a Port Neches, Texas, Allstate office, says she hasn't met face-to-face with any of the three firms that have administered her payroll checks over the years.
"We've investigated the claims, and we find them to be strongly with merit and we intend to go forward with the case and see it through," said lead lawyer Karl Novak of Ness Motley Loadholt Richardson & Poole, one of three firms representing the Allstate workers.
The Charleston, S.C., law firm was involved in tobacco suit settlements in Mississippi, Florida and Texas.
Michael Fritz works for Investment News, a sister publication of Business Insurance.