Brokers will remain independent contractors in California’s new gig economy

Some in the real estate industry were worried that a mass reclassification of agents as employees would upend the system

Sep.September 12, 2019 10:02 AM
Real estate agents will likely remain contractors under a proposed state bill (Credit: iStock and Wikipedia)
Real estate agents will likely remain contractors under a proposed state bill (Credit: iStock and Wikipedia)

Real estate agents have always had an unusual relationship with their employer, connected to the company but classified as independent contractors. In California at least, that’s how they’ll remain.

The state’s sweeping new legislation to reclassify independent contractors of the gig economy as employees with all the requisite benefits would exempt brokers.

Under the provisions of the state bill — which Gov. Gavin Newsom is expected to sign — agents would not be included in the so-called “ABC” test that California will require to determine whether a worker should be classified as an independent contractor or an employee, according to Inman.

As an employee, the worker would be entitled to minimum wage, health benefits and workplace rights.

AB 5 was mostly meant to address labor issues of app-based companies. Drivers for ride-hailing services including Uber and Lyft, for example, are among those expected to be reclassified under the bill. Uber has already said it will not abide by the new legislation.

Some in the real estate industry feared that Assembly Bill 5, as it’s called, would force brokerages to reclassify their agents as employees, driving up costs and threatening their bottom line. As the bill is currently written, agents are not included, neither are securities brokers, commercial fishermen, and cosmetology workers, among other workers.

Real estate brokers will instead be subject to an “economic realities test” to determine worker status, which will likely mean they remain as contractors.

The California Department of Industrial Relations’ guidance on that test says that “the most significant factor to be considered is whether the person to whom service is rendered — the employer or principal — has control or the right to control the worker both as to the work done and the manner and means in which it is performed.” [Inman]Dennis Lynch

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