Approximately 89% of National Association of REALTORS® members are classified as “independent contractors” within their brokerage firms, but recent lawsuits and proposed federal legislation have placed increased scrutiny on that status.
A recent case in New Jersey could have a lasting impact on how real estate brokers classify their salespeople. The dispute was brought to an end thanks to advocacy efforts led by the New Jersey Association of Realtors and a recent state Supreme Court decision, which increases the likelihood of no future problems in the state. .
“We have engaged in aggressive advocacy to protect independent contractor status in New Jersey. Without our efforts, the ability of our members to maintain independent contractor status would be called into question. “They knew it would happen,” said Jarrod Grasso, CEO of the New Jersey Association of Realtors.
In 2019, Weichert was sued by one of its salespeople, alleging that the brokerage misclassified him and other agents as independent contractors rather than employees. The complaint alleges that this misclassification resulted in agents illegally deducting marketing fees and other expenses from their commissions.
Plaintiff previously entered into two written contracts with Weichert, agreeing to work with the company as an independent contractor from 2012 to 2018. However, the court held that the salesperson’s status should be determined not by the brokerage agreement but by the legal standard governing employee classification issues under New Jersey’s Wage Payment Law (WPL), the so-called “ABC” test. The judgment was given.
New Jersey REALTORS®, with legal assistance from NAR, filed an amicus brief expressing concern that this case could set a precedent for brokers’ ability to determine employee status . The New Jersey association also successfully lobbied the state Legislature to amend the New Jersey Real Estate Licensing Act, known as the Brokers Act, to clarify that written agreements between brokers and salespeople define worker status. . New Jersey lawmakers enacted this amendment in 2018 and passed a further amendment in 2022 clarifying that the 2018 amendment is retroactive.
The changes worked, and the New Jersey Supreme Court dismissed the case this week.
“This decision allows real estate companies to designate agents within their organization as independent contractors or, if they prefer, employees,” Grasso said. “The New Jersey Association of Realtors views this as a major win for the real estate industry in the state.”
The ruling could set a precedent for many more states. “This is the first case in the country to be decided on this issue and could have a significant impact across the country,” said Greenbaum Rowe Smith & Davis, who represented New Jersey REALTORS®. said Barry S. Goodman, the company’s attorney. Summary of the court. “Many brokerages said they would fire salespeople who were not high producers if they discovered they were employees. There may have been real-world consequences, too.”
In fact, John F. Birmingham, an attorney at the Foley & Lardner law firm who represented Ms. Weichert in this lawsuit, said that this ruling means that real estate brokers and salespeople should He said he supports the state’s revised law that would allow the state to decide “Mr. Weichert is grateful that after five years of litigation, the real estate industry has clarity on this important issue,” Mr. Birmingham said. Although each state has its own interpretation, “this decision could serve as a model for other states’ legislation and judicial decisions,” he added.
NAR’s Legal Action Program has provided assistance to both Weichert and New Jersey REALTORS® since the beginning of the case in 2019. Real estate salesperson employee classification continues to receive national attention. NAR continues to advocate for legislation that protects the independent contractor classification status of medical practitioners across the country. Check out NAR’s recent “Window to the Law” video below for tips on brokering your place as a salesperson and independent contractor.
