Real estate agent: employee or independent contractor?

From Human Resources Director, discusses a recent case in California in which the court said a real estate salesperson was an independent contractor based on a law that specifically said employment does not include real state. Bernise writes:

The California Court of Appeal recently ruled that the lower court applied the correct standard to determine whether a real estate salesperson was an independent contractor, not an employee, for the purposes of the Labor Code’s wage and hour provisions.

The plaintiff alleged that he was acting on behalf of similarly-situated real estate agents who were misclassified as independent contractors when they should be considered employees, who were not properly paid wages, who were subject to unlawful deductions, and who were not reimbursed for reasonable and necessary business expenses.


According to the trial court, the applicable test for deciding whether the plaintiff was an employee or an independent contractor for the purposes of his PAGA claim and derivative Labor Code claims was the test under section 650 of the Unemployment Insurance Code, which was incorporated in section 10032(b) of the Business and Professions Code, which was in turn incorporated in section 2778(c)(1) of the Labor Code.

In 2020, the plaintiff filed the second amended complaint. The defendant again filed a demurrer. The trial court sustained the demurrer and dismissed the second amended complaint. The plaintiff appealed.

The California Court of Appeal for the Fifth District affirmed the trial court’s judgment. The trial court applied the correct test in sections 650 and 13004.1 of the Unemployment Insurance Code and properly concluded that the plaintiff was an independent contractor, the appellate court ruled.

Read the full story at Real estate agent: employee or independent contractor? | HRD America

The court relied on section 650 of the Unemployment Insurance Code which states:  

“Employment” does not include services performed as a real estate, mineral, oil and gas, or cemetery broker or as a real estate, cemetery or direct sales salesperson, or a yacht broker or salesman, by an individual if all of the following conditions are met:

(a) The individual is licensed under the provisions of Chapter 19 (commencing with Section 9600) of Division 3 of, or Part 1 (commencing with Section 10000) of Division 4 of, the Business and Professions Code, Article 2 (commencing with Section 700) of Chapter 5 of Division 3 of the Harbors and Navigation Code, or is engaged in the trade or business of primarily inperson demonstration and sales presentation of consumer products, including services or other intangibles, in the home or sales to any buyer on a buy-sell basis, a deposit-commission basis, or any similar basis, for resale by the buyer or any other person in the home or otherwise than from a retail or wholesale establishment.

(b) Substantially all of the remuneration (whether or not paid in cash) for the services performed by that individual is directly related to sales or other output (including the performance of services) rather than to the number of hours worked by that individual.

(c) The services performed by the individual are performed pursuant to a written contract between that individual and the person for whom the services are performed and the contract provides that the individual will not be treated as an employee with respect to those services for state tax purposes.

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