Appeals court upholds independent contractor status in win for the industry

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A Massachusetts appellate court has considered a potential class action lawsuit brought against a broker by former salespeople alleging that they were misclassified as independent contractors.

A group of real estate salespeople (“Salespeople”) who were formerly associated with real estate brokerages (collectively, “Brokerages”) brought a class action lawsuit against the Brokerages for allegedly misclassifying the Salespeople as independent contractors instead of employees.  Based on this alleged misclassification, the Salespeople claimed that there were violations of the state’s wage payment laws, including minimum wage and overtime requirements, and other penalties for the misclassification. Read More

From the Massachusetts Association of REALTORS®

On June 3, 2015, the Supreme Judicial Court issued its decision in Monell v. Boston Pads, LLC. The Court upheld the Suffolk County Superior Court ruling, affirming that real estate brokers and salespersons have the ability to affiliate as either independent contractors or employees.

Win for Consumers and Real Estate Industry

This decision is a win for consumers and the entire real estate industry because real estate brokers and salespersons will still be able to work as independent contractors. Affiliating as an independent contractor has been the backbone of the profession for more than 100 years.

“We are pleased that the Massachusetts Supreme Judicial Court affirmed the pro-consumer choice by real estate professionals to affiliate as either independent contractors or employees.” said 2015 MAR President Corinne Fitzgerald, broker-owner of FITZGERALD Real Estate in Greenfield. “This relationship has worked for generations and it is what consumers have come to expect regarding agent entrepreneurship and availability. We’re glad the choice will continue.”

What You Need to Know

REALTORS® may continue to affiliate as either independent contractors or employees. Brokers and salespeople who engage their sales agents as independent contractors should continue to follow the advice of legal counsel, including using and adhering to the provisions of a written Independent Contractor Agreement.

Background

The case was originally heard before the Suffolk County Superior Court and a decision was issued in July 2013. The case dealt with the issue of whether real estate salespersons, who agreed to be treated as independent contractors, should be treated as “employees” for purposes of Massachusetts wage and hours laws by virtue of the Massachusetts Independent Contractor Statute. Had the plaintiffs been successful in this claim, this could have potentially converted all real estate agents into employees. The Superior Court held that the existing practice of brokers and salespersons affiliating as independent contractors is consistent with state law. Further, brokers and salespersons may affiliate as either an independent contractor or as an employee, and the Independent Contractor Statute does not govern the relationship between brokers and licensed real estate agents.

The Supreme Judicial Court affirmed the Superior Court’s judgment, thereby upholding the lawfulness of independent contractor status among Massachusetts sales agents.

Attorneys

Stephen Perry and Robert Kutner of Casner & Edwards, LLP represented the defendant-brokers. The Massachusetts Association of REALTORS®, along with the Greater Boston Real Estate Board, filed an amicus brief (“friend of the court brief”) in support of the defendant-brokers. The brief, authored by Philip S. Lapatin of Holland & Knight LLP, clearly explained why the Court should uphold the Superior Court’s ruling. Specifically, the brief argued that overturning this decision would be inconsistent with the legislature’s intent to allow for brokers and salespersons to affiliate as independent contractors and that it is important for practitioners and consumers that brokers and agents continue to have the ability to choose to affiliate as independent contractors or as employees.

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