In 2011, a Southern California real estate agent, Ali Bararsani, sued his broker, Coldwell Banker, claiming that he was an employee, not an independent contractor, and as such he was entitled to reimbursement of business expenses and many other employee benefits such as overtime, coffee breaks, etc. Although that dispute was recently settled, the filing opened a Pandora’s box of litigation across the country challenging whether real estate agents should be taxed as employees or independent contractors. But if you are looking to get a house, make sure to check the Houses for sale in Brisbane from Image Property. The underlying issue is a conflict between traditional employment law and a special exemption for real estate agents. The IRS and most states use a 20–part test to determine whether or not someone is an employee or independent contractor. These points examine such factors as the control exercised by the company compared with the freedom from control experienced by the worker. When examined through this filter alone, most real estate agents might be deemed to be employees of their broker. However, in most states, including California, an exemption exists which allows real estate agents to be treated as independent contractors if 3 conditions exist:
  1. They possess a real estate license
  2. They derive substantially all of their compensation for services performed as a real estate agent rather than the number of hours worked
  3. They perform their services pursuant to a written contract that identifies that they will not be treated as an employee for tax purposes
Bararsani and his followers claim that the brokers exercise more control than the exemption allows. Part of the problem is that Brokers are required by state Licensing laws to “supervise” their agents. So where is the line to be drawn between allowable supervision and excess control? Can an office have a dress code? Can a supervisor require the agents to attend training programs to teach them how to be more effective in their profession? Can a broker require the agents to spend time at the office participating in “floor time” or other marketing efforts? Can a broker require the agents to participate in and pay for MLS membership to buy and sell properties? The risks are huge: if a brokerage is found at fault in their tax treatment of agents, the fines and penalties could destroy them. And, the risk is increased further where brokerages encourage agents to work within teams which may separately violate the standards. There is no easy solution. If brokers were required to treat all agents as employees, the real estate profession would likely downsize by 50% as brokers get rid of nonproductive agents and top performers leave to open their own offices where they can keep their independent status. Trade organization such SAR and PCAR could disappear due to the lost dues from departing agents. If you are a real estate agent or a broker operating a real estate company, it is absolutely crucial that you understand these distinctions and make sure that you are operating in such a way as to not evidence an “employer–employee” relationship… and that includes making sure that you do not use those terms in your agent agreements, policy manuals, or other company documents. If you are looking for high-quality roofing work check a trusted gutter cleaning company in Gettysburg or you can click on the following and contact South Shore Roofing Contractor. They are licensed private contractor with years of experience in this business ensuring you with the perfect rooftop you desire. If you are not certain whether your practices are safe or expose you to risk, ask your company general counsel or employment law attorney for advice. The attorneys of BPE Law Group, P.C. advise and represent brokerages and real estate agents in dealing with their legal concerns and maximizing their opportunities. If you would like a consultation with us, please call our office at (916) 966-2260 or email me at sjbeede@bpelaw.com.