Are Real Estate Agents Now Employees?
Tuesday, June 19, 2018
The California Supreme Court recently gave a boost to those arguing in favor of being treated as employees rather than independent contractors. In the Court’s 82-page opinion in the case of Dynamex Operations West, Inc. v. Superior Court, the Court applied a three-factor test to decide whether someone was an independent contractor. The new test replaces an earlier, more complicated standard. The case was decided in the context of whether California wage orders applied to delivery drivers for Dynamex. A very real question is how the California Labor Commissioner will interpret the case in view of California real estate licensing law.
Referred to as the “ABC” test, it requires that (A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity. Each of those factors must be present to consider someone an independent contractor.
Since the California real estate law requires brokers to supervise agents, arguably a real estate agent would fail one of the tests for an independent contractor, that is that the worker be free from control and direction. It is also questionable whether the work of a real estate agent is outside the usual course of a real estate broker’s business. And the Court seemed to also focus on the traditional person going into business for themselves in a trade or occupation.
The Labor Commissioner can seek unpaid wages and damages for employees. Without some clarity an unaffordable minimum wage requirement will dramatically change the dynamics of several industries, including real estate sales. Certain groups may seek future changes to the law, such as carving out certain occupations, in response to the decision.