N.J. Case Creates Model for Independent Contractor Status

From the National Association of Realtors, Melissa Dittmann Tracey discusses a recent New Jersey case in which the Supreme Court said that real estate agents could be classified as independent contractors notwithstanding other labor laws. Melissa writes:

In 2019, Weichert Co. was sued by one of its sales associates who claimed the brokerage had misclassified him and other agents as independent contractors instead of employees. The complaint alleged that the misclassification meant agents faced unlawful deduction of marketing fees and other expenses from their commissions.

The complainant had previously entered into two written agreements with Weichert, agreeing to affiliate with them as an independent contractor from 2012 to 2018. Yet a trial court ruled that the salesperson’s status should not be determined by a brokerage agreement but by a legal standard that governs employee classification issues under New Jersey’s Wage Payment Law (WPL), known as the “ABC” test.

The New Jersey association also successfully lobbied state lawmakers to amend the New Jersey Real Estate License Act, often known as the Brokers Act, to clarify that written agreements between a broker and salesperson define the worker’s status. New Jersey lawmakers enacted the amendment in 2018 and, in 2022, passed a further amendment clarifying that the 2018 amendment is retroactive.

That change paid off: The New Jersey Supreme Court dismissed the case(link is external) this week.

Source: N.J. Case Creates Model for Independent Contractor Status

The New Jersey Supreme Court relied on amendments to the Brokers Act that were enacted after the New Jersey’s Supreme Court decision that the ABC test applied to questions of whether a worker was an employee or independent contractor under New Jersey’s labor laws. These amendments made it clear that the agreement determined the relationship between the broker and real estate agent. The New Jersey Supreme Court said

The plain language of the Brokers Act addresses the question raised by this appeal. A real estate broker and a broker-salesperson or salesperson 24 seeking to conduct real estate activities must execute a written agreement defining “the nature of the business affiliation” between the parties as either an employment relationship or an independent contractor relationship. N.J.S.A. 45:15-3.2(a), (b). The statute expresses no preference between the two options; that question is for the parties to resolve. N.J.S.A. 45:15-3, -3.2; -14 to -20.

Here, the real estate broker and the real estate salesperson agreed in writing to affiliate in an independent contractor relationship, thus complying with N.J.S.A. 45:15-3.2(a) and (b). The Brokers Act expressly defines the consequences of that choice; it provides that brokers and broker-salespersons or salespersons may affiliate in an independent contractor relationship, “[n]otwithstanding any provision of” the Brokers Act “or any other law, rule, or regulation to the contrary.” N.J.S.A. 45:15-3.2(b). The Legislature’s use of the word “notwithstanding” is significant; “[i]n construing statutes, the use of such a ‘notwithstanding’ clause clearly signals the drafter’s intention that the provisions of the ‘notwithstanding’ section override conflicting provisions of any other section.” Cisneros v. Alpine Ridge Grp., 508 U.S. 10, 18 (1993). Thus, in the Brokers Act, the Legislature clearly intended that if the parties’ business affiliation agreement under N.J.S.A. 45:15-3.2 conflicts with another law, rule or regulation, the agreement will prevail.

See Kennedy v. Weichert

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