It’s been a tough time for real estate professionals. The industry is just beginning to adjust to the NAR ruling that left real estate in upheaval, completely changing the way professionals addressed representation for their clients. But the wake of that ruling could be a cakewalk compared to what’s on the horizon. Earlier this year, the U.S. Department of Labor (DOL) dropped its final rule on independent contractor status. However, conflicts with California law, specifically State Assembly Bill 5, are opening the door for potential lawsuits and a reinterpretation of independent contractor status. Now, real estate professionals are waking up to an attack on their professional freedom.
Protections for California’s Real Estate Professionals
In 2020, California Assembly Bill 5 went into effect, protecting independent contractor status for real estate professionals across the state. But even before AB 5 put up its safeguards, real estate agents enjoyed protections via the Internal Revenue Code (IRC) that allowed agents to set their own terms as contractors. The IRC protections date back to 1982, creating a foundation upon which over four decades of industry subsequently developed.
Conflicts Between Federal and State Law
It’s outrageous to imagine that independent contractor status for real estate agents would fall under scrutiny after all this time. But the DOL’s final rule has done just that, calling into question California law with contradictory criteria for the classification of independent contractors.
According to the DOL, the following six factors of financial dependence constitute an employee instead of an independent contractor:
- Nature/degree of control
- Opportunity for profit/loss depending on managerial skill
- Investments by worker and potential employer
- Degree of permanence in the working relationship
- Extent to which the work performed is an integral part of a potential employer’s business
- Skill and initiative
AB 5 sets up drastically different criteria to indicate an independent contractor. Under this California law, independent contractor status is set when an individual is:
- Licensed
- Works under a contract exempting them from the tax status of an employee
- Is compensated relative to sales rather than hours worked
Since the DOL unveiled their final rule earlier this year, points of contention have been popping up. So far, the most controversial of the DOL’s rulings is the “extent to which the work performed is an integral part of a potential employer’s business.”
The Inherent Freedom of a Real Estate Professional
The truth is that real estate has never been just a career. The rigors of the work demand a certain sense of freedom. Real estate professionals frequently set their own hours to pivot to the needs of their clients. They work in the field so frequently that many agents don’t have anchoring offices. Real estate agents negotiate their own contracts, make their own professional choices, and define their careers on their terms. The ruling set by the DOL threatens those freedoms.
Fight for Real Estate – Take Action Now
In the coming months, the voices of real estate professionals are going to go a great distance toward establishing the constitution of independent contractors in California. Therefore, it’s important that those with a career in real estate make their voices heard. How can you make sure your voice makes a difference?
Here’s how you can help in just 15 seconds:
(1.) Visit FightForRealEstate.com
(2.) Click the link to fill out a form on NAR’s website, asking your congressperson to protect independent contractor status for real estate agents.
(3.) Share this blog with anyone who can benefit from it. Real estate professionals need to know what’s coming.
Let Congress know that your independent contractor status means something. Head to FightForRealEstate.com and fight for your career!
Contributor, designer & admin for JohnHart Gazette.
