When is a real estate agent considered an employee? This question, which has been hashed out in courts throughout 2016, had more light shed on it when a case involving an agent and a car crash came before a judge.
According to court documents, a real estate agent for MartinezRusso Re/Max was returning from a sales appointment when his car crossed the center line and struck another driver in a tractor-trailer.
Both men died in the accident, and the victim’s wife filed a wrongful death suit against the brokerage.
In her suit, the wife said the brokerage was “vicariously liable” for the agent’s alleged negligence.
In response, MartinezRusso Re/Max filed, and was granted, a summary judgment in which they claimed they were not liable because the agent was an independent contractor — not an employee.
The wife appealed the summary judgment, but the Arizona Court of Appeals ultimately ruled in favor of MartinezRusso because the state’s license law only requires brokers to supervise “its salespeople in the performance and documentation of a real estate transaction by specifying the types of transaction records that must be maintained.”
The law doesn’t require brokers to supervise actions taken by salespeople, such as driving. Furthermore, the court said the license law doesn’t create an employer-employee relationship between the broker and the salesperson, so the salesperson could be classified as an independent contractor.
The victim’s wife argued against the agent’s independent contractor status by claiming the brokerage exercised control over the agent, thus creating an employer-employee relationship.
The court rejected her argument by saying real estate agents have “nearly complete discretion” in how to perform their jobs — they choose their working schedule, create their own marketing materials, set up their own appointments and drive their own cars.
The only thing the brokerage provided was an office and administrative support, both of which the agent paid for, the court said.
Other lawsuits involving independent contractor status
This case is the latest in a string of lawsuits that have challenged agent’s independent contractor status and have called into question whether agents or brokerages are responsible if something goes wrong.
In January, Bararsani v. Coldwell Banker settled out of court for $4.5 million; $1.5 million went to lawyers, and the rest was dispersed to plaintiffs.
In the case, Ali Bararsani, a California real estate agent, claimed Coldwell Banker Residential Brokerage in Southern California “willfully misclassified” current and former affiliated real estate associates as independent contractors while “exerting significant control” over their work.
Although the brokerage settled the suit, it released a statement saying that it “remains firm in its belief that it has properly classified its affiliated agents as independent contractors and that preserving the freedom for agents and brokers to engage one another as independent contractors is important to the independence, flexibility and ingenuity that energizes our industry.”