Should Realtors in California Still Be Classified as Independent Contractors?

Realtors in California may not be able to be classified as independent contractors following a state Supreme Court decision.

How Does California Classify Independent  Contractors?

A recent California Supreme Court ruling says all workers in the state are presumed to be employees unless they pass something dubbed the “ABC test.” This test dictates that a worker is an independent contractor only when each of the following conditions can be proven:

• The worker is not controlled or directed by the hiring company when performing their work. This must be the case in the terms of any contract and in the actual performance of the work.
• The worker performs tasks that are outside the typical business of the hiring company.
• The worker has an independently established trade, occupation, or business that coincides with the nature of the work being performed.

Are Realtors in California Independent Contractors?

Not all realtors in California are independent contractors. If a hiring company can establish that a worker meets all three of the conditions in the ABC test, it can classify the realtor as an independent contractor. However, if even one of the conditions is not met, the realtor may be classified as an employee, according to California law.

Opponents to the recent state Supreme Court ruling (Dynamex Operations West v. Superior Court of Los Angeles) cite California Business and Professions Code Section 10032 in their argument that brokerage firms have the option to classify its realtors as employees or independent contractors. The code states:

“A real estate broker and a real estate salesperson licensed under that broker may contract between themselves as independent contractors or as employer and employee, for purposes of their legal relationship with and obligations to each other.”

Why Would Companies Misclassify Their Employees?

Some employees argue that companies purposely misclassify workers to save money. Workers classified as employees are entitled to more benefits and pay protections than what is typically owed to independent contractors, meaning that companies are forced to invest much more into their workers if it classifies them as employees.

Between consistent wages, overtime benefits, medical, supervision, and the costs of administrative and human resource jobs, companies may view employee classifications as a monetary loss.

When workers are classified as employees, the company is legally obligated to pay overtime, to reimburse employees for expenses, and give them meal and rest breaks. The cost of payroll taxes, unemployment insurance and workers’ compensation insurance also impact a company’s bottom line when a worker is classified as an employee. 

In the case of realtors in California, companies may take advantage of what it sees as an ambiguity in the law when classifying them as an employee or independent contractor. Many realtors are paid commission and have flexible schedules that resemble those of other independent contractors.

Can I Take Legal Action if I was Misclassified as an Independent Contractor?

If you believe you were misclassified as an independent contractor, you may have a legal case. A qualified legal professional can evaluate your case and determine your eligibility for compensation.

Join a Free Independent Contractor Class Action Lawsuit Investigation

Even if you are classified as an independent contractor, you may be entitled to minimum wage, overtime pay, reimbursement for expenses, and meal and rest breaks, among other employee benefits.

Learn More

This article is not legal advice. It is presented 
for informational purposes only.