ZipRealty’s move to convert agents in 19 states from employees to independent contractor status is generating erroneous reports that the company is pulling out of some of those states.
As ZipRealty files required notifications with state labor departments that it’s laying off agents — many of whom will remain with the company as independent contractors — newspapers are misinterpreting the filings, the company said.
Philly.com — the website of the Philadelphia Inquirer and Philadelphia Daily News — this week published and then retracted a story that ZipRealty would "likely close its operations in Pennsylvania," after filing notice with the state Department of Labor that it planned to lay off 92 employees at its Bala Cynwyd office on Jan. 31. The story remained cached in Google servers today.
John Oldham, ZipRealty’s director of marketing, said the brokerage has no plans to pull out of Pennsylvania or close its office in Bala Cynwyd.
"The notice was sent to inform the State of Pennsylvania (of) a change in employment status for those that work as real estate agents out of that office," Oldham said. "We are engaging agents from this office as independent contractors and expect to keep agents working in Philadelphia."
The Jacksonville-based Florida Times Union on Thursday reported that ZipRealty was "pulling out of Florida," citing a letter the company sent to Jacksonville’s mayor.
Oldham said that story was also incorrect, and that ZipRealty has no plans to close offices in Florida.
The Florida Times Union story was later edited to clarify that ZipRealty was "pulling out of Florida as an employer" and that laid-off agents would continue to work as independent contractors.
But the original version of the story — suggesting that the company was pulling out of Florida altogether — was distributed by McClatchy-Tribune Information Services and posted today on TradingMarkets.com.
The confusion apparently stemmed from the wording of filings ZipRealty is required to make under the Worker Adjustment and Retraining Notification (WARN) Act.
In a WARN Act filing with Florida regulators, ZipRealty said it was terminating 312 employees at offices in Bonita Springs, Jacksonville, Miramar, Maitland and Tampa, and that it "may close its real estate office facilities in the state."
"However, ZipRealty agents who choose to continue a broker-agent relationship with ZipRealty may be engaged as independent contractors," the company said.
In reporting on a similar regulatory filing in Oregon, the Portland Business Journal was careful to note that "while (ZipRealty is) laying off 51 agents, it could enlist the workers as independent broker-agent contractors."
ZipRealty converted all of its agents in California, New York and Nevada to an independent contractor status in 2010 — about one-third of the company’s agent count nationwide at of the end of October.
In a press release issued this week, ZipRealty said the number of agents working as independent contractors in California has grown by more than one-third since the switch to the new model on Sept. 1, and now exceeds 1,000 — a new record.
As independent contractors, those agents no longer enjoy the benefits they received as employees, including medical insurance, dental insurance and 401(k) retirement plans (most real estate brokerages employ agents as independent contractors).
In announcing a $5.1 million third-quarter loss, ZipRealty said it plans to plans to convert about 2,000 agents in 19 other states to independent contractors by Jan. 31, 2011.
In its most recent quarterly report to investors, the Emeryville, Calif.-based brokerage said converting agents in New York, Nevada and California to independent contractors allowed it to slash expenses associated with agent performance and tenure-based programs, benefits and expense reimbursements by 41 percent — a $1.3 million savings.
"We expect decreases in benefits and expense reimbursements as we continue to experience the impact of converting ZipAgents from employees to independent contractors," the company said in its quarterly report, although "cost of revenues" may increase or decrease as a result of the mix of commission rates paid to agents.
ZipRealty reported its 3,305 agents represented buyers in 4,630 transactions during the third quarter, a 23 decline percent from the same period a year ago. The company’s agents represented sellers in 450 transactions during the same period, a 15 percent decline from a year ago.