By Kevin Cleveland
Young, Cohen & Durrett
Real Estate Agents are exempt from the recent changes to the Independent Contractor Test which was created by AB5 and the Dynamex decision. Since they fall under an exception, they are subject to the old Borello Test, which at its core evaluates how much control an employer reserves the right to exert over an independent contractor/employee when determining status.
However, pursuant to California B&P Code §10032, a real estate salesperson may be classified as an independent contractor ONLY IF ALL three of the following conditions from UIC §650 are met:
They possess a real estate license; AND
They perform their services pursuant to a written contract that identifies that they will not be treated as an employee for tax purposes; AND
They derive substantially all of their compensation for services performed as a real estate agent rather than the number of hours worked.
Bararsani v. Coldwell Banker (2013) establishes that B&P §10032 gives deference to real estate professionals being treated as independent contractors but does not require that people are independent contractors if the above three requirements are met (aka if you meet the three requirements it does not automatically make you an independent contractor, instead we look to the “Right to Control” test from Borello).
So in short, to be an independent contractor a real estate salesperson must meet all three of the conditions under California B&P Code §10032 and the relationship with the company which hired them must be the sort of hands-off relationship expected under the “Right to Control” test from Borello. If all of those criteria are not present then the real estate salesperson is an employee of the hiring entity and the Labor Commissioner would have jurisdictions regarding any claims for unpaid wages or other compensation, including unpaid commissions.