In the U.S. real estate industry, 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. In recent months, a California court of appeals has ruled that the Dynamex ABC test applies only to the rights and obligations set forth in California wage orders. Salary scale 4 applies to real estate sellers and requires employers to comply with labor laws that govern basic minimum working conditions such as minimum wage, maximum working hours, overtime, rest and meal hours, payroll, etc. Other labour laws, such as an employer`s requirement to reimburse employees for work-related expenses, employee leave, paid family leave and workers` compensation, are outside the pay scales. Thus, in Garcia v. Border Transportation Group believed that Dynamex`s ABC test applied to obligations defined in California`s salary scales, but the pre-Dynamex multifactorial test, which focuses on whether the hiring company had the “right to control,” applies to obligations defined outside of payroll orders. Are California real estate agents still independent contractors? 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. Given the flexibility for a broker and a broker, one should not ignore the costs associated with working as a broker, which would normally be reimbursed by an employer. For example, many brokers have to bear the cost of smartphones, GPS, laptops, and work-related marketing materials while missing various salary benefits. Statutory non-employees are subject to the same tax filing requirements as independent contractors. This includes: “Ten Ways to Successfully Manage Your Relationships with Independent Contractors” Legal Issues Related to Recent Employee Classification Disputes Diagram that describes various state labor law requirements for classifying real estate professionals Important provisions for agreements with independent contractors As a real estate agent, it is crucial to understand the difference between a Know Employees and a independent contractor (and it`s even more important to share it with others). Real estate agents are generally accepted as independent contractors in the United States. But an upsurge in litigation is challenging this status, and the need to define your relationships with your agents has never been more important than it is today. 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.
The real estate industry turned to the legislator and asked for special treatment with regard to the status of independent contractor. The laws of the time — and they still do — had a list of standards that were quite rigid and made it very difficult to run a real estate agent agency without the agents being employees. Responsibility for one`s own work plans, business functions, accounting systems and other activities in the course of business are the characteristics of an independent contractor. In this case, there should be a written contract or agreement between the contractor and the company. Many agencies hire real estate agents as employees. An employee works for a company or other person for remuneration. Subsequently, the employee earns a salary or hourly wage. An independent contractor contract is a very important element in establishing an independent contractor relationship with a real estate seller, but the existence of an agreement is not enough to avoid misclassification. Courts and regulators will examine the reality of the relationship, how the parties have interacted, and the degree of control a broker exercises over the real estate seller to determine the true nature of the relationship between the parties.
Special treatment for real estate agents was introduced by the IRS to ensure the liability assumed by brokers if brokers otherwise complied with these rules. The IRS said real estate agents, as well as direct sellers and some escorts, are “statutory non-employees” for tax purposes. As such, they are considered self-employed for tax reasons, just like an independent contractor. A number of resources on this topic can be found on the Independent Contractor page of www.nar.realtor: Becoming an Independent Contractor Starts and Ends with taking responsibility for your own business. Many real estate agencies and brokers mistakenly refer to employees as independent contractors. Depending on how much a real estate agency influences your work, you may be acting as an employee from a legal perspective. If this is the case, you will not get the benefits to which you are entitled, such as: an independent real estate contractor works as an agent and retains exclusive control of his business functions such as working hours 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. Some definitions of the term state that the person or entity hiring the contractor is not responsible for the contractor`s actions, but most state real estate laws make the broker liable to an agent responsible for his or her actions. In addition, given the considerable impact of the Dynamex decision on many sectors, including real estate, the business community is pressuring the California legislature to address Dynamex`s impact, including its impact on brokerage firms and real estate agents. Currently, there are competing laws in Sacramento regarding Dynamex. One labor-backed bill aims to codify Dynamex, while a second bill, backed by commercial organizations such as the California Chamber of Commerce, seeks to return to the multifactorial test before Dynamex, which focuses on whether the hiring company had the “right to control” to determine the status of an independent contractor.
The result could be a compromise between these two positions after lengthy negotiations ongoing. A proposal that excludes real estate agents from the Dynamex ABC test is part of these negotiations, but to date, there is no such exception in the proposed legislation, and Dynamex continues to be the law of the land. Stay tuned, as this topic will also be at the forefront of California`s 2019 legislative year. Real estate agents and brokers are specially classified by the IRS as legally independent contractors. In the changing world of real estate services, it is important to stay informed about the rules governing this status, as new business models and new methods of compensation can lead to classification as employees. However, in many cases, a real estate agent can be held liable for the actions of their real estate agents, even if they are classified as independent contractors. In contrast, this is generally not the case with other independent contractor relationships that exist in other industries. For this reason, the IRS treats real estate agents as “statutory non-employees” for tax reasons. .
