When you hire a Realtor, have you ever really thought about who they are actually working for?
One would hope that they are working for your best interest and will assist you in the buying or selling of a property to the best of their ability and protect YOUR interests.
But when it comes to paying taxes and the eye’s of the federal government, how are they classified? Are they independent contractors who work for themselves and their own small business? Or are they employees who work for their broker?
Traditionally they have been classified as an Independent Contractor who while they do work for the broker, they have done so in an Independent Contractor. They owe some of their commission and duty to the Broker in Return for the use of the Brokerage Name and other services the Broker offers to them. But if they don’t produce any commissions, they don’t make anyone any money.
In the past few years, there have been new models to the real estate industry, whereby the Realtor is now just an employee getting paid an hourly salary to work for the broker’s best interest.
Realtor.org reports there has been a “recent wave of litigation . . . challenging the longstanding practice within the real estate industry of brokers choosing to classifying real estate agents as independent contractors, as opposed to employees.” This matter has gone all the way to the State Supreme Court in Massachusetts and they have settled the matter, at least in Massachusetts. They have determined that Real Estate Agents are independent contractors.
The case of Monell v Boston Pads was one of standards, the ChicagoAgentMagazine.com reports. “Because they were supervised by managers, worked during mandated office shifts and were ordered to do certain tasks (such as taking out the trash), their working conditions were essentially that of employees, and they therefore deserved the same privileges as employees; furthermore, the plaintiffs still paid the typical monthly/daily fees that all real estate agents (and independent contractors) are used to, including a fee for having their listings re-posted every day on Craigslist.”
The Court ruled in favor of Real Estate Law and the long standing practice of Realtors working as Independent Contractors for the broker, however they did not address wage law provisions on independent contractor vs employee leaving the door open for further litigation.