Question Details

John Souerbry, Real Estate Pro in Palo Alto, CA

Are your agents "employees"?

Asked by John Souerbry, Palo Alto, CA Sat Feb 16, 2013

Here in California, agents working for an employing Broker sign an Independent Contractor Agreement and are considered independent contractors for tax and supervision purposes. But they are considered employees for other things, such as the requirement for the Broker to provide Worker's Comp insurance. Do employing Brokers in other states have similar requirements?

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Thanks for all the great comments. Vast majority of agents in CA are 1099, though I know a few brokers who have experimented with W-2 status from time to time. Never seems to last.
Even when an agent receives a 1099, the State of California treats them both as an independent contractor and as an employee on a situation-by-situation basis. The state is quick to remind broker/owners that they are "employing brokers", not "contracting brokers", when it comes to requirements for Worker's Comp insurance and most professional liability issues.
1 vote Thank Flag Link Sun Feb 17, 2013
Yes, John, I understand.

While legally we can't be "forced" to attend meetings, take floor time,etc.........the broker can cancel our contract at any given time. So......... if you're not a team player.......and not a producer....I daresay you're time may be limited with a particular company..as per the example you referenced.

Anyway, as someone who had the opportunity to take advantage of being covered by a WC insurance plan........I will graciously accept being called an "employee"!

Dealing with the ins and outs of WC coverage was an eye opening experience. I innocently thought (at first) that the "nice insurance lady" on the phone had my best interest at heart.......well..........I quickly learned it doesn't quite work that way!

Hope you never have to find out!
0 votes Thank Flag Link Sun Feb 17, 2013
Debra - although our standard California contract says an agent can't be required to attend meetings, work in a particular territory, use specific marketing tools or methods, or serve floor time, everyone knows that if they aren't generating commissions their contract can be terminated for that reason.
One example is an agent I worked with 10 years ago who had her name and direct phone number on her listing signs (which is standard in most offices). The broker/owner required that only office information be on listing signs, since this was one of the major tools they had to drive phone calls to agents on floor time. My friend cried foul and complained that her signs met legal requirements and that the broker/owner didn't have the right to make her use their generic signs. The broker/owner backed off, then about 6 months later my friend ran out of listings and her contract was terminated. Other agents in the office took it as a "sign" (pun intended) that the broker/owner has ways to enforce their policies, legal or not.
0 votes Thank Flag Link Sun Feb 17, 2013
well John, so it seems NJ and CA have something in common, besides the fabulous weather! haha (NOT - it's 30 degrees here today)!

The NJ Supreme Court determined, I believe back in 2000, that real estate agents are acting as "employees", for purposes of workmen's comp, rather than independent contractors - thereby requiring Brokers to cover their agents........ so I understand CA emphasizing the concept of "employing brokers" versus "contracting brokers".

I was told the NJ court's thought process was.......since most agents (in larger companies anyway) are required to attend office meetings, or do "up" time, and work within office stated/ company imposed objectives and rules..........and may be restricted as to what commissions they might charge - basically, they are overseen and controlled as to how they conduct their business......... etc, etc........... in the end they are more like employees than true indep. contractors........they said if the IRS wants to accept IC status, they can, but the state of NJ said - nope - if it looks like a duck and quacks like a duck.......it's an employee!

I will say, however, that a W-2 status could look pretty appealing at times!

:)
0 votes Thank Flag Link Sun Feb 17, 2013
Joe - John is simply asking a general question to see how the subject of workmen's comp is handled in other states, and it's interesting to see how it varies around the country.

John - good question!

So far, it seems to be that if a Realtor is going to get injured on the job, they better be in CA or NJ!

:)

ps
as per the IRS - all independent contractors are 1099'd - it's not a state by state decision - it's a federal one ( if you've signed an independent contractor's agreement with your broker, then that's what you are in the eyes of the IRS )!
0 votes Thank Flag Link Sun Feb 17, 2013
Btw... In WI it is a 1099 also.
0 votes Thank Flag Link Sun Feb 17, 2013
Is there a specific state you are wondering about?
Click the link below to see more on this broker agent relationship for every state.
0 votes Thank Flag Link Sun Feb 17, 2013
No workers comp here in New York State we are all 1099, too.
0 votes Thank Flag Link Sun Feb 17, 2013
ps

BTW - we are all 1099'd, too, but how the IRS sees you has nothing to do with the possibility of being covered under workmen's comp.


I assumed (incorrectly) I was NOT covered when I broke my arm.
Several days later my manager called me to tell me I was covered...imagine my surprise!
0 votes Thank Flag Link Sun Feb 17, 2013
Same here John...

In NJ, agents are treated as "employess" for the purposes of workmen's comp - and are supposed to be covered, by their Broker, under workmen's compensation plans.

Just ask me - I broke my arm last year after falling during my open house, so (unfortunately) I am well versed on this topic!

ps sorry for you agents in FL!

:)
0 votes Thank Flag Link Sun Feb 17, 2013
NO workers comp here we are all 1099... sorry for you brokers in CA.
0 votes Thank Flag Link Sun Feb 17, 2013
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