BrokerageRegulations

Labor Department clarifies distinction between employees and contractors

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What truly constitutes an independent contractor? That question has been a recent hot topic, with Uber and other sharing services at the center of the fray.

Although this debate isn’t specifically targeting real estate agents, it’s important to stay on the heels of any developments, as they could play a larger role in the 1099 classification.

The industry has been no stranger to the depths of this controversy since Redfin and ZipRealty made headlines with their class-action lawsuits regarding whether agents were considered contractors or salaried employees.

The Department of Labor released some guidance on July 15, clarifying six specific factors that separate independent contractors from employees, according to the Fair Labor Standards Act.

Does the worker perform the primary type of work that the employer offers its clients? The clarified guidelines specifically state that if the individual’s work is an integral part of the employers business, he or she should be considered an employee. In the case of the brokerage and agent relationship, it’s hard to argue that the agent doesn’t perform an integral part of the business.

Another factor is whether the company or the employee invested more money in the job. These things could include a car, tablet, smartphone and any other tools necessary to get the job done. Whether or not employees are reimbursed for these items is also important.

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One factor that pertains to the majority of agents considered to be contractors is that they are able to set their own schedules. However, this also extends to pay rate, whether the individual is able to work for another company at the same time, a specific dress code and how employers gauge quality work.

Another factor leaning in favor of most agents is the level of skill required for the job, the ability to make independent judgments and the opportunity to market one’s services independently. The permanency of the worker-employer relationship also must be considered.

The lines are still blurred because the real estate industry’s structure is vastly different than most others. Pending legislation and future clarification might change the industry drastically –- or leave the contractor question on the table for another few years.

Email Kimberly Manning.