Many successful real estate brokers and agencies have one or more assistants on staff. Commonly, these assistants are themselves licensed real estate agents gaining valuable experience by working for a high-producing agent or team. Unfortunately, it is not uncommon for these assistants to be improperly classified as independent contractors when they are, by law, employees.

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Real Estate Agent & Realtor Misclassification

In California and elsewhere, the classification of Realtor’s and real estate agents as either employees or independent contractors is a contentious issue.

Real Estate brokers and agencies who misclassify their employees — instead labeling them as independent contractors — deny their employees critical benefits. These benefits include, for instance, family and medical leave, unemployment insurance and significant civil rights protections.

Real Estate agencies often require their Realtors to spend a significant amount of money out-of-pocket to pay for items such as business cards, brochures, videos, websites, and insurance. If the real estate agent is actually an employee, the broker or agency is legally required to reimburse the agent for all of these business expenses which can total thousands of dollars every year. Some agencies even require their agents to purchase these materials directly from the agency — another violation of the California Labor Code.

Recently, real estate agents and Realtors have successfully brought lawsuits challenging their employers for willfully misclassifying them as independent contractors when they were actually employees. These cases have resulted in a windfall for the agents. For example, in Bararsani v. Coldwell Bankers, the Defendant real estate brokers settled with the plaintiff class for $4.5 million.

The Major Differences Between Independent Contractors versus Employees
Independent contractors are intended to be independent. Therefore, the more control the employer exerts over the worker, the more likely that worker should be classified as an employee and therefore entitled to the wide array of benefits afforded to employees.

While there is no set of factors that qualifies a worker as an employee or ab independent contractor, some factors that provide evidence of the degree of control and independence include:

  • Instructions the business gives the worker, including, e.g., when and where to work; what tools or equipment to use; where to purchase supplies and services; and what work must be performed by a specified individual;
  • Whether the employe has the right to control how the work results are achieved;
  • Whether the business provides training for the worker;
  • Whether the business requires compliance with policies and procedures;
  • The extent to which the worker has unreimbursed business expenses, including whether there are ongoing costs that would be incurred regardless of whether work is currently being performed;
  • Written contracts describing the relationship the parties intend to create, including the tasks and duties the worker agrees to perform;
  • The permanency of the relationship; and
  • The extent to which services performed by the worker are a key aspect of the regular business of the company.

Legal Action Challenging Real Estate Agent and Realtor Misclassification
Numerous lawsuits have recently explored the circumstances in which real estate agents are improperly classified as independent contractors. For instance, in Bararsani v. Coldwell Banker, a plaintiff class of real estate agents accused Coldwell Banker Residential Brokerage Company of misclassifying their real estate agents as independent contractors, while treating them as employees. The lawsuit was settled in January 2016 for $4.5 million.

In Bararsani the real estate agent plaintiffs alleged that Coldwell Banker exerted significant control over their work such that Coldwell had “willfully misclassified” its workers. Examples of this control include requiring the real estate agents to work at a designated physical location, requiring them to attend training meetings and precluding them from working for any other company.

Coldwell Banker unsuccessfully argued in a demurrer that the real estate agents were correctly classified as independent contractors based on the California Business and Professions Code Section 10032. Nevertheless, the Los Angeles Superior Court ruled in favor of the plaintiff class, holding that a proper determination of whether an individual is really an employee of the principal depends on a close factual analysis of the extent of control exercised by the principal. The court also noted that, while the written contract between Coldwell Banker and its agents showed a mutual agreement for independent contractor status, “that is the beginning, not the end of the analysis.”citing Narayan v. EGL Inc. (9th Cir. 2010) 616 F. 3d 895, 904.

Ultimately, the parties settled the case out of court, with Coldwell Banker parting with $4.5 million in exchange for the plaintiff’s agreement to not seek further legal action against the defendant.

Are You a Realtor or Real Estate Agent that Has Been Misclassified as an Independent Contractor?
If you have been misclassified as an independent contractor but are actually an employee, you may have a legal claim to significant penalties for the reimbursement of your business expenses, failure to provide accurate wage statements and other Labor Code violations. You do not need to currently be working for this employer in order to assert these claims; both past and current workers have the right to bring these claims as long as the statute of limitations is met.

For these complex cases, it is crucial that you have experienced legal representation on your side. You can bet your employer will hire the best attorney they can find. After all, they do not want to pay those penalties or pay you what you are owed. Do not put yourself in a disadvantaged position. Call Betsy Havens and the legal team at Strong Advocates today. Fight for what you deserve.

*REALTOR® is a trademark owned by National Association of Realtors (NAR). Strong Advocates is in no way affiliated with NAR.

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