Employee or independent contractor?

by Deanna Kane

A recent lawsuit filed in Miami federal court by real estate agent Beatriz Santamaria against Cervera Real Estate — alleging that Cervera misclassified her as an independent contractor — is the latest in a series of lawsuits across the country challenging the conventional notion that real estate agents are independent contractors.

While Santamaria, who alleges she worked more than 40 hours a week out of a sales gallery in Miami but did not receive a salary or hourly pay, is not the first to contest her employment classification, her lawsuit comes amidst a larger debate about employee classification spurred by the sharing economy.

Last month, legislators in California approved a bill that requires app-based companies like Uber and Lyft to treat workers as full-fledged employees, rather than contractors. “The state can’t sit by while companies pass off their own costs of doing business onto taxpayers and responsible businesses, while depriving millions of workers of the labor law protections they are so rightly entitled to,” said Assemblywoman Lorena Gonzalez (D-San Diego), as she pitched her bill to a state senate committee.

While licensed real estate agents are exempt from Assembly Bill 5, which is intended to force gig companies to offer workers basic protections like minimum wage and unemployment, it is opening up a conversation about real estate agent classification, especially for agents like Santamaria, who work full-time or more at new development projects.

“When a real estate employee is assigned to a sales office, working for one developer, given 9-to-5 hours and asked to work overtime and on weekends, they should be classified as [an] employee and compensated according to the law,” Raymond Dieppa, who is representing Santamaria, told Boston Agent. “When they’re not being paid a wage, that’s a loophole that’s being exploited.”

The suits and legislation beg the larger question: What makes someone an employee? In Massachusetts, an employer who wants to treat someone as an independent contractor rather than an employee has to show that the work:

  • is done without the direction and control of the employer; and
  • is performed outside the usual course of the employer’s business; and
  • is done by someone who has their own, independent business or trade doing that kind of work.

Employers who misclassify employees as independent contractors may face criminal enforcement or civil penalties.

According to the National Association of Realtors, in order to establish an independent contractor relationship, the following activities should be avoided:

  • Requiring the worker perform services during set work hours
  • Requiring the worker perform services at a specific location
  • Making attendance at staff meetings mandatory
  • Providing training to the worker
  • Supplying tools and materials to the worker

But ultimately, whether real estate agents should be considered employees or independent contractors is a question that should be left up to brokerages, according to the NAR in a white paper on the topic: “The independent contractor relationship between brokers and their salespeople is a longstanding tradition in the real estate industry. NAR supports the protection of, and efforts to further secure, the right of brokers to choose whether to classify their real estate salespeople as employees or as independent contractors.”

Whether or not the new push to reclassify gig workers as full-time employees ever extends to real estate agents is a complicated question, said Dieppa. “It really depends on how much time they spend at a particular office. But in general, I would hope this will lead to more workers knowing their rights and more legislation to protect employees, including realtors.”

In the meantime, Dieppa is moving full speed ahead with the litigation. “The case is filed, Cervera has responded and they’re asking for a mandatory mediation and arbitration,” he said. “Our intention is to pursue the case in federal court, or if necessary, in arbitration.”

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