States Highest Court Rules that Real Estate Agents can be Treated as Contractors, but Leaves Substantial Questions Unresolved

In a major decision that impacts a huge number of Massachusetts businesses, the state’s highest court today affirmed the concept that real estate salespeople may properly be classified as independent contractors and not employees. In doing so, the Supreme Judicial Court concluded that the Massachusetts Independent Contractor Statute, which generally governs classification issues and makes it extremely difficult for companies to properly treat workers as contractors, does not apply to real estate agents. Its reasoning relies on the existence of a distinct statutory scheme that governs real estate sales work and expressly provides that salespeople may be treated as either employees or contractors. Because the court saw major conflicts between the two sets of laws, it held that the more specific one dealing with the real estate industry governs.

The decision does not, however, resolve the ultimate issue whether real estate agents at work today are employees or contractors. Noting a lack of clarity on the question how to determine this question, the SJC left it for another day. It held simply that real estate sales people are not subject to the framework spelled out by the Independent Contractor Statute, Mass. Gen. L. ch. 149, §148B, a framework that would render every salesperson an employee. The SJC expressly permitted the plaintiffs to continue to pursue their misclassification claims, though without relying on Chapter 149. The court invited the Massachusetts Legislature to “clarify how a real estate salesperson may gain employee status under the real estate licensing statute.” It is patent that this cannot be done by simple declaration in a written contract.

The industry should stay tuned. The case is Monell v. Boston Pads, LLC, decided on June 3, 2015.