Regulations

How does Uber’s employee vs. contractor battle affect real estate?

California Labor Commission's Uber decision has implications for this industry

California courts have ruled that one Uber driver is no longer considered an independent contractor — she’s an employee.

This could have big implications for real estate if a pending case decides to use this as a precedent.

The California Labor Commission’s decision not only has implications for the California ride-hailing community, but also the company’s valuation and other crowdsourcing services, including Lyft, Instacart and TaskRabbit.

Uber spokeswoman Kristin Carvell released a statement stressing that the ruling is “nonbinding” and impacts only one driver, the individual woman who filed a claim in September. And because Uber is appealing the decision, it has not made major changes to the way it does business in California — at least for now.

California is the home base of Uber and one of its largest markets, which means that this ruling could very well be mimicked in other states throughout the nation.

The differentiation between independent contractors and employees has been controversial in the past, but it begs the question: Are all 1099 employees and contract-based industries in for a rude awakening?

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“So, California has ruled that Uber drivers are ’employees’ and not contractors. Sounds like a familiar argument for us real estate industry peeps,” said Seth Siegler, founder of Curb Call, in a Facebook post.

In fact, there is a pending case in Los Angeles County Superior Court that could have a lasting impact on the real estate industry in California and the nation as a whole: Bararsani v. Coldwell Banker Real Estate Brokerage Company (CBRBC).

The case questions whether real estate agents should be considered independent contractors or employees. This case could have an even more overwhelming impact on the real estate industry, which has been treating its agents as independent contractors for decades.

On June 3, the Supreme Judicial Court in Massachusetts ruled in favor of brokers in a case that challenged agents’ independent contractor status.

Although this decision ruled in favor of maintaining the option for brokerages to hire agents as either independent contractors or employees, Bararsani v. CBRBC is challenging the classification in a state that is home to a much larger population of both agents and brokerages.

The pending case in California has been in progress since November 2012. California’s three-part test is typically the standard by which an agent can be classified as an independent contractor:

  • Agents must be licensed.
  • Agent payment must be based on sales and not hours worked.
  • There must be a written contract between the company and the agent clarifying the agent’s classification.

Because all three of the elements were met, CBRBC tried to file a demurrer, a motion to dismiss, in July 2013. The court also denied CBRBC’s motion to allow the trial court to look at a 20-factor test.

The suit has since been filed as a class action, bringing even more complication and attention to a case that is still pending with the California Superior Court. And there are a number of other cases pending that may shake up the industry. Cruz v. Redfin was filed in 2013 in California as well.

The Uber case is in a different wheelhouse than the CBRBC case, but the outcome could be indicative of how other independent contractor status cases pan out. A major component to consider in the Uber case is that “without drivers, the business would not exist,” which some believe could play a huge role in the status of the real estate agent as well.

Because the business models are similar in that agents and drivers create their own schedules and earn wages based on the amount of work they complete, it’s hard to understand how one group could be considered employees and the other not.

However, one caveat to the similarity between Uber drivers and real estate agents is that Uber encourages drivers to maintain certain standards.

“One interesting aspect of this, though, is that Uber does impose strict rules of conduct during rides on their drivers to maintain a consistent consumer experience,” Siegler says, referring to things like not asking for a tip and offering a water.

“I was always under the impression that you couldn’t really do that with contractors and that is why it’s hard for real estate brands to offer any semblance of consistency from agent to agent.

“To me, this is the key point that the case should focus on. I think this case should be monitored by the industry though. Especially in [California].”

Email Kimberly Manning.