Michael Lissack has filed a complaint against Owners.com, alleging that it misclassifies agents as independent contractors rather than employees who should have been paid minimum wage. Here’s what it could mean for the industry.

When my three articles on the California Supreme Court Dynamex decision were published on Inman earlier this year, Michael Lissack contacted me about a complaint that he had already filed in California with the Division of Labor Standards Enforcement (DLSE) against his former employer, Owners.com.

Since then, he has filed some form of complaint in all the states Owners.com operates in: Florida, Illinois, Georgia, Ohio, Pennsylvania, Texas and Massachusetts.

His complaint alleges that Owners.com misclassified its agents as independent contractors rather than employees — hence, its agents should have been paid minimum wage.

Lissack only has “standing” in California and Massachusetts (which means he can be compensated if there is a judgment against Owners.com), but he wanted to bring up issues against the company in all the areas in which it operates.

Read the Inman story from Wednesday for a further outline of the case. When asked for a response to Lissack’s claims, Owners.com provided the following statement to Inman reporter Patrick Kearns: “Owners.com has reviewed the allegations, and they are without merit.”

I think this case could have profound consequences for the industry, that gets at the very heart of how most real estate brokerages are organized, built around a business model that depends on the independent contractor.

The industry can no longer ignore this conflict between the real estate statutes and the labor statutes in terms of what constitutes “supervision.”

And why might this set of actions by an single agent have the gravitas to carry the day on this important issue? Because the agent involved should not be underestimated. He is obsessed with righting a perceived wrong, knowing there could be significant consequences for the real estate industry.

Background

Michael Lissack is currently a licensed real estate agent in three different states — California, Florida and Massachusetts. In California and Massachusetts, he worked for Owners.com. In Florida, he worked for a different brokerage. His real estate practice focuses on serving buyers, and he says he has already closed over $11 million in sales for 2018.

Earlier this year, Lissack felt there were issues with how he was being supervised at Owners.com. At that point, he resigned from the company in Massachusetts. He says  he wanted to wrap things up in an “orderly fashion in California” the following week before leaving.

Yet when Owners.com received his resignation in Massachusetts, it immediately terminated him in California.

In response, Lissack provided me with over 200 pages of documents supporting his claims that Owners.com was treating its agents as employees.

Included in those documents were copies of his California Independent Contractor Agreement (ICA), the Owners.com training manual, plus a copy of his complaint to the DLSE in California.

He also supplied a copy of his complaint in Massachusetts, plus a number of supporting emails. Much of his documentation can be reviewed here.

After a dispute with the company over his compensation, Lissack decided to file a complaint against Owners.com.

It’s hardly the first time he has taken an employer to task. When Lissack was on Wall Street, he reported a “yield burning” scam involving municipal bonds that was ultimately settled against multiple firms for over $200 million. According to Wikipedia:

In February 1998, Lissack entered into a voluntary agreement with the U.S. Securities and Exchange Commission whereby he was banned from the securities industry for five years and paid a $30,000 fine, as part of an arrangement by Lissack’s legal team for Lissack to be on record as taking some responsibility for the scandal.

The supporting documentation from the SEC can be found here.

Lissack’s complaints

The following excerpts from Lissack’s complaints point to potential issues with Owners.com, and by extension, potentially other brokerages, cutting across a variety of business areas.

1. Inadequate supervision (ICA, p. 2)

I’m unaware of any state that allows a supervising broker to only “periodically review and audit files to ensure proper supervision.” All states require the managing or supervising broker to review and audit all transaction files for compliance.

2. Requiring that all transactions flow through dotloop (ICA, p. 3)

Although a company may highly recommend or encourage its IC agents to use a specific transaction management system, it can only require use of a specific system if that agent is an employee.

Furthermore, any time an employer uses the word “must,” it’s usually an indication of being an “employee” rather than an IC.

3. Forced adherence to the company’s value propositions (ICA, p. 4)

Companies can suggest that ICs aspire to a specific value proposition the company sets forth, but “enforcement” applies to employees, not ICs who are supposed to be “free of supervision.”

4. Agents are prohibited from having personal websites and using the internet data exchange (IDX)

ICs are free to market their services in the way that they choose. They cannot be forced to rely exclusively on the company’s website, especially in this case where it appears that Owners.com wasn’t offering agent websites at the time this ICA was executed. Telling agents that cannot use IDX sites is also an issue.

 

5. Required training (found of page 56 of this document)

Again, while ICAs are required to maintain their licenses in good standing, their employing broker cannot make other types of internal company training mandatory, especially in a “designated time frame.”

 

6. Required email signature block

Lissack also supplied me with an email dated June 1, 2017. This email explicitly directed agents at Owners.com about how they should sign their emails including a specific example for “John Doe.” Note the specificity of the direction right down to the type and size of the font.

 

7. Minimum wage

He further alleges that Owners.com required its agents to be available 12 hours per day to receive incoming phone leads. A copy of Lissack’s wage request in the CA DLSE complaint is below.

Based on the examples above and many more, Lissack is pursuing a complaint with the CA DLSE and the other seven states where Owners.com operates. His complaint alleges that Owners.com agents were treated as employees, and hence, should be entitled to a minimum wage.

What if?

This is just one of many actions leading to the government rethinking independent contractors across many industries.

Failure to address this issue means the real estate industry will continue to live with ongoing litigation that could ultimately result in massive disruption throughout the industry.

The time for us to tackle these issues is now.

Bernice Ross, President and CEO of BrokerageUP (brokerageup.com) and RealEstateCoach.com, is a national speaker, author and trainer with over 1,000 published articles. Learn about her broker/manager training programs designed for women, by women, at BrokerageUp.com and her new agent sales training at RealEstateCoach.com/newagent.

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