Real Estate Agent Independent Contractor or Employee
After lengthy trial proceedings, the Trial Court concluded that both plaintiffs were employees; the defendant then appealed. Although the court decided several issues, the only relevant issue in this case was whether the trial court was correct in concluding that the plaintiffs were employees. The Connecticut Supreme Court found that the trial court correctly determined the plaintiffs` employment status. As regards the defendant`s real estate company, the Court of First Instance held that Raveis retained the right of control and in fact exercised much of the control over the real estate sellers and sales managers associated with it. Sales representatives and managers were required to attend mandatory board meetings; both did business under the name Raveis; both used the company`s letterhead, business cards and accessories; both were to attend training courses; and both were threatened with dismissal if they did not meet these requirements. Real estate agents and brokers are specially classified by the IRS as legally independent contractors. In the changing world of real estate services, it is important to stay informed about the rules governing this status, as new business models and new methods of compensation can lead to classification as employees. If real estate agents were hired, it would lead to two different outcomes: bad for the industry. First, large real estate agents would reduce their productivity. If their salary doesn`t depend on the value of their real estate sale, why should they keep working so hard? Second, lazy real estate agents would be even lazier.
Because they can receive a salary no matter how many sales they have made. As a real estate agent, it`s important to know the difference between an employee and an independent contractor (and, more importantly, tell others). Real estate agents are generally accepted as independent contractors in the United States. But an upsurge in litigation is challenging this status, and the need to define your relationships with your agents has never been more important than it is today. According to this NAR white paper, twenty-two state laws allow real estate agents to treat their real estate sellers like contractors. At the same time, the broker exercises its legal obligations of supervision. It may sound self-explanatory, but the law ensures that real estate agents do not put assistants or agents in training on the status of independent contractor. This is important because the real estate professional who is licensed and enjoys the status of an independent contractor should always remember that this means that he is a business and that he is the owner of the business. However, in many cases, a real estate agent can be held liable for the actions of their real estate agents, even if they are classified as independent contractors.
In contrast, this is generally not the case with other independent contractor relationships that exist in other industries. For this reason, the IRS treats real estate agents as “statutory non-employees” for tax reasons. A number of resources on this topic can be found on the independent contractor status page of www.nar.realtor: Independent contractor rather than employee status is mainly based on three concepts: Independent brokers often have significant expenses such as brochures, business cards, websites, videos, and insurance. If you are an employee, the agencies are legally responsible for reimbursing you for the costs related to the business. Often, these expenses can amount to thousands of dollars per year. For legal reasons, the main difference between an employee and an independent contractor is often determined by the degree of control a company has over the employee. The more control a company has over the employee, the more likely it is that the employee will be considered an employee. The real estate industry turned to the legislator and asked for special treatment with regard to the status of independent contractor.
The laws of the time — and they still do — had a list of standards that were quite rigid and made it very difficult to run a real estate agent agency without the agents being employees. Some definitions of the term state that the person or entity hiring the contractor is not responsible for the contractor`s actions, but most state real estate laws make the broker liable to an agent responsible for his or her actions. Responsibility for one`s own work plans, business functions, accounting systems and other activities in the course of business are the characteristics of an independent contractor. In this case, there should be a written contract or agreement between the contractor and the company. Be aware of other state laws that could base the status of an independent contractor on customary law for the purposes of unemployment and workers` compensation. In these states, the broker must meet the most restrictive requirements based on what they are. For many years, it has not been clear whether the sellers working in real estate agencies are employees or independent contractors. The distinction has a significant impact on all parties involved. An employer is required to withhold money from paychecks for things like federal income tax and social security on behalf of employees.
Of course, there is more than a lot of paperwork associated with this commitment. Special treatment for real estate agents was introduced by the IRS to ensure the liability assumed by brokers if brokers otherwise complied with these rules. The IRS said real estate agents, as well as direct sellers and some escorts, are “statutory non-employees” for tax purposes. .