The Chicago Association of REALTORS®, the “Voice for Real Estate” in Chicago since 1883, represents 17,000 members from all real estate specialties including commercial sales, development, property management, appraisal, auctions and residential sales.
Learn how we help our 17,000 members. Membership options are available for licensed real estate professionals and those affiliated with the real estate industry!
REALTORS® Real Estate School offers all kinds of real estate licensing and training. Browse self-paced, online training or live classes in our modern, downtown classrooms!
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Misclassifying an employee as an independent contractor excludes an employee from benefits, overtime and unemployment insurance. As an employer, misclassification can lead to severe employer penalties and fines. Misclassification resulted in a $97 million settlement in Vizcaino v. Microsoft. Estrada v. FedEx resulted in an award of $5 million in compensation and $13 million for attorney fees, and a separate FedEx case concluded with a ruling of $319 million in back taxes and penalties.
A Win for the Real Estate Industry
On June 3, 2015, the Massachusetts Supreme Judicial Court ruled that real estate salespeople are, in fact, independent contractors, rather than employees. In Monell v. Boston Pads, LLC, the plaintiff argued that, because the firm required office hours and training, their agents deserved to be classified as employees, not independent contractors. The court disagreed and ruled in favor of the defendant, but had they sided with Monell, the decision would have had a major impact on the industry as a whole, and an immediate effect on the Massachusetts real estate brokerages, as brokers would have been responsible for back pay, benefits and fines.
While the ruling was an overall win for the real estate industry, unfortunately, the court was not asked to decide what rules could be applied to determine whether a person should be considered an independent contractor or employee..
The Key: It’s All About Control
Whether a worker is an employee under the Fair Labor Standards Act is a legal question determined by the economic realities of the working relationship between the employer and the worker, not by job title or any agreement the parties may make.
The amount of control a broker exerts over an individual determines whether they are an independent contractor, versus an employee. The less control a broker exerts over their agents, the more likely that the independent contractor status will prevail.
Payment and Taxes
Once the determination has been made regarding whether an individual is an employee or independent contractor, you must be sure that they are being paid correctly and that taxes are handled properly.
Employees must:
Be paid on a regular basis
Report income on W-2
Withhold federal, state and local income taxes
Withhold and pay social security and Medicare taxes
Pay unemployment tax on wages paid
Independent contractors must:
Be paid on a commission basis
Report income on 1099
Be responsible for paying their own taxes
What about assistants, or individuals other than brokers?
The above criteria still applies.
Keep in mind, too, that when in doubt, the safest course of action is to consider the individual an employee.
*Disclaimer: The information provided here should not be substituted for legal advice.
Donna Garcia, MSHR, SPHR, SWP, RCE, Director, Association Strategic Business Planning, National Association of REALTORS®
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We Apologize for the Inconvenience
Our phones are temporarily down. Please email membership@chicagorealtor.com for any immediate needs. We apologize for the inconvenience – thank you for your patience!
Precautionary Measures and Information Regarding COVID-19
Your health and safety is of the utmost importance to us. As COVID-19 is predominantly spread through close contact, out of an abundance of caution, all events through April 30 will be either canceled or postponed, except for Coffee with Your GADs, which will take place virtually. This includes our annual Sales Awards, which we are working to reschedule.
If you have registered for one of our upcoming events, look for an email with further details. All tickets for paid events will be automatically refunded. Please allow 3-5 business days to see the refund on your bank statement. Questions? Please reach out to our events team.
Precautionary Measures and Information Regarding COVID-19
As COVID-19 is predominantly spread through close contact, out of an abundance of caution, all in-person classes scheduled through April 30 will take place virtually.
RRES staff has reached out to those of you who have registered for an affected class with an option to transfer into an online option or reschedule for a later classroom date. CAR to You is available in the meantime to assist you with your education needs and we have a variety of classes being offered online and via webinar for your continued development.
