National brokerage company ZipRealty announced Thursday that all of its agents in California will become independent contractors.
ZipRealty has 910 agents in California, about 28 percent of its total number of agents nationwide. As of Sept. 1, ZipRealty will engage all of its agents in California as independent contractors.
In all but two of the 35 markets ZipRealty covers, the company’s agents are employees. The other two markets are Las Vegas and New York, where agents are independent contractors.
ZipRealty was the nation’s fifth-largest brokerage by transaction sides in 2009, according to Real Trends.
"Given that California is home to the highest percentage of real estate transactional volume within the real estate industry overall as well as for ZipRealty, the need to be flexible and open to change here in order to remain competitive is critical. Top-performing agents will be able to earn more in commission as independent contractors than they did with the old model," said Leslie Tyler, the brokerage’s vice president of marketing.
According to the Internal Revenue Service, business owners generally do not have to withhold or pay taxes on payments to independent contractors.
Independent contractor status depends on the degree to which a company controls how a worker does his or her job; whether it controls the economic aspects of a worker’s job; and the type of relationship the company has to the worker, including whether or not the company pays the worker benefits.
As part of the transition, ZipRealty will no longer offer their California agents the benefits they currently receive, including medical insurance, dental insurance and 401(k) retirement plans.
The California agents "will continue to have access to the company’s proprietary technology, marketing support, and training and brokerage resources," the announcement said, and Tyler said ZipRealty has no plans to shift to the independent contractor model in other states at this time.
"From a financial standpoint, this shift is expected to provide greater opportunity for our agents, while also improving ZipRealty’s ability to drive growth and innovation long term," said Patrick Lashinsky, ZipRealty’s CEO and president, in a statement.
The company also announced that it will continue to offer its "customer satisfaction guarantee," and to reward agents based on the quality of their service.
According to the National Association of Realtors’ 2010 Member Profile, 81 percent of Realtors are independent contractors.