Real estate brokerage and referral site operator ZipRealty Inc. will pay $5 million to settle allegations by the California Labor Commissioner that the company failed to pay minimum wages and overtime pay to hundreds of real estate agents.

The California Labor Commissioner filed suit against ZipRealty in 2011 seeking more than $17 million in back wages, damages and penalties, not long after a Kern County Superior Court Judge awarded $330,000 to four former ZipRealty agents who filed complaints with the labor commissioner in 2010. After filing a motion for a new trial, ZipRealty agreed to settle that case in November for $586,000. 

The Emeryville, Calif.-based brokerage converted all of its California agents to independent contractor status in 2010. Even before then, it maintained its agents were exempt from California’s hourly overtime wage requirements because they were classified as "outside salespersons."

In announcing the settlement, ZipRealty denied any wrongdoing, saying "the sole job of ZipRealty agents was to conduct real estate transactions and, like nearly all agents across the industry, ZipRealty agents were paid commissions on those transactions."

The settlement provides for a $500 base payment to ZipRealty agents who were classified as employees from March 28, 2007, through Aug. 31, 2010. The remainder of the $4.8 million set aside to pay back wages will be used to cover unpaid minimum wages, using a formula that assumes a 40-hour workweek for each week employed during that period.

The state Division of Labor Standards Enforcement will receive $200,000 to cover attorneys fees and costs.

ZipRealty has hired Gilardi & Co. LLC to serve as a third-party administrator to distribute funds to eligible claimants. Checks will begin going out on Nov. 1 to those who agree to release ZipRealty from further claims.

ZipRealty reported its first profit in nearly six years during the second quarter, generating $314,000 in net income during the three months ending June 30. Revenue was down 14 percent from a year ago, to $20.3 million, and the number of agents engaged by the company was down 31 percent, to 1,508, at the end of June.

Since January 2011, the company has closed down brokerage operations in 15 markets: Fresno, Calif.; Charlotte, N.C.; Naples, Fla.; Jacksonville, Fla.; Miami; Palm Beach, Fla.; Tampa, Fla.; Hartford, Conn.; Minneapolis, Minn.; Virginia Beach, Va.; Tucson, Ariz.; Atlanta, Ga.; Raleigh-Durham, N.C.; Philadelphia, Pa.; and Salt Lake City, Utah. The company also shuttered the Westchester-Bronx portion of its New York office earlier this year.

ZipRealty has moved to a referral model in a number of those markets. The company currently provides "Powered by Zip" leads to brokerages that supply with Internet data exchange (IDX) listings in 12 markets: Fillmore Real Estate in Brooklyn, N.Y.; Century 21 American Homes in Queens, Nassau and Suffolk (N.Y.) counties; Better Homes and Gardens Real Estate Metro Brokers in Atlanta; Westchester, N.Y.-based Better Homes and Gardens Real Estate Rand Realty; Long Realty in Tucson; Coldwell Banker Howard Perry and Walston in Raleigh, N.C.; Coldwell Banker Hearthside in Philadelphia; Bob Parks Realty in Nashville; Coldwell Banker Vanguard in Jacksonville, Fla.; Prudential Utah in Salt Lake City; Prudential Tropical Realty in Tampa; and Illustrated Properties in Palm Beach.

ZipRealty continues to operate brokerage offices in 20 markets: Austin, Texas; Baltimore, Md.; Boston; Chicago; Dallas; Denver; Houston; Las Vegas; Long Island, N.Y.; Los Angeles; Orange County, Calif.; Orlando, Fla.; Phoenix, Ariz.; Richmond, Va.; Sacramento, Calif.; San Diego; San Francisco; Seattle; Portland, Ore.; and Washington, D.C.

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