Ultimately, your choice as a real estate agent is to hire real estate agents or hire them as independent contractors. It is imperative that this relationship between the two parties be clear in order to avoid litigation in the future. Statutory non-employees are subject to the same tax filing requirements as independent contractors. This includes: In the real estate industry in the United States, real estate agents, although under the supervision of real estate agents, are generally not considered employees unless that employer/employee has been specifically indicated. Instead, real estate agents are considered independent contractors in most cases. An independent real estate contractor works as an agent and retains exclusive control of their business functions such as work schedules and accounting. The “contractor” part of the term indicates that some type of written agreement or contract has been performed with the company or the person it hires to perform a task, work or function, usually its broker. The case involved two people who worked for one of Connecticut`s largest real estate companies, William Raveis Real Estate, Inc. Gluck was a real estate seller for the defendant from January 1982 to March 1988.
From 1986 to 1988, Lyren was a sales manager for the defendant`s office in Greenwich and later for the defendant`s office in Trumbull. As the claims of the two were similar, they were judged together. This landmark case could have a significant impact on the real estate industry in California due to the uniqueness of real estate agents and brokers. However, the California Business and Professions Code states that the relationship between a real estate agent and an agent can be either an employee-employer relationship or an independent contractor. In Bararsani v. Coldwell Banker, there was a class action lawsuit accusing Coldwell Banker of classifying its real estate agents as independent contractors while treating them as employees. It has been proven that the company has significant control over the work of its real estate agents, including determining where and when agents would work. The settlement of the case was approximately $4.5 million, although much of the settlement funds were used for legal fees.
The amount of each real estate agent involved in the class action was minimal. While it is true that most agents have to work under the supervision of a broker, this does not change the fact that they are in business as independent contractors for themselves. You may receive ads, a desk, and a phone from your broker if you`re an agent, but they`re not the owner of your business. In California, the situation is complex because of the Dynamex case. In that case, the Supreme Court adopted a new three-factor “ABC test” for deciding whether a person is an independent contractor. The test puts the onus on the employer to prove all this: one of the reasons why brokers do not hesitate to hire new inexperienced agents is that there are really no big investments. The fact that real estate agents are accountable to brokers can muddy the waters compared to other industries where the relationship between independent contractors is clearer. Real estate agents have more autonomy than an employee, but the necessary supervision of a broker is a unique factor. Federal and state employee classification laws, as well as state real estate licensing laws, apply to a broker`s classification of its sellers. At the federal level, the Internal Revenue Service has created a special legal status of non-employee for real estate professionals that qualifies them as independent contractors if all of the following requirements are met: To establish an independent contractor relationship, here is a list of the types of activities to avoid: When reviewing the employment relationship, the most important factor is the right to: to control not only the results of the work, but also the working methods.
This control test is inherently a balancing test. The Court recognized that the determination of general review is not always a simple problem; Many factors are usually present for consideration, none of which is necessarily conclusive in itself. Legally, the main difference between employees and independent contractors is the degree of control the company has over the individual employee. If the company has significant control, that person is likely to be considered an employee. But if the company has very little control and individuals in their role have the freedom to do their jobs at will, they are more likely to be classified as independent contractors. To protect yourself and your business from unnecessary risks associated with your real estate agents, make sure you have adequate insurance coverage for you and your team. CRES Real Estate E&O+ ClaimPrevent® is fully customizable, allowing us to tailor a solution specifically to your business needs. A free hotline for legal services is also available 7 days a week with your E&O+ ClaimPrevent policy®, so you can get help before facing a lawsuit.
As regards the defendant`s real estate company, the Court of First Instance held that Raveis retained the right of control and in fact exercised much of the control over the real estate sellers and sales managers associated with it. Sales representatives and managers were required to attend mandatory board meetings; both did business under the name Raveis; both used the company`s letterhead, business cards and accessories; both were to attend training courses; and both were threatened with dismissal if they did not meet these requirements. For legal reasons, the main difference between an employee and an independent contractor is often determined by the degree of control a company has over the employee. The more control a company has over the employee, the more likely it is that the employee will be considered an employee. Clearly, the court found that the defendant`s right to control its employees far outweighed the factors suggesting an independent contractor relationship. It`s not obvious that Raveis` offices operate so differently from most real estate agencies across the country. What does this mean for the real estate industry? Employers have a significant degree of control over their employees and can determine when, how and where employees perform their duties and responsibilities. Employers also often provide their employees with the necessary “tools”. In contrast, an independent contractor can generally determine when, how and where to perform their work and is responsible for any tools or equipment necessary to provide the services. .