You may have heard about the passage of a new California law that designates most workers traditionally labeled as independent contractors as employees instead.

In an attempt to provide independent contractors with employee benefits such as health insurance, paid family leave and sick time, AB 5 reclassified what can and cannot result in independent contractor status. Real estate agents, along with several other professional groups such as doctors and insurance agents, have been left out of these requirements.

Here is the new “ABC” test that now exists for independent contractors:

(A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact. 

(B) The person performs work that is outside the usual course of the hiring entity’s business. 

(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

For real estate agents, the bill carved them out of these requirements. Specifically, Professions Code 10032 gives real estate agents independent contractor status as long as they meet the following requirements:

  1. Parties have a contract in writing that states the agent is not treated like an employee for the services.
  2. They have a real estate license.
  3. All money paid is correlated with sales instead of the amount of hours worked.

This means that real estate agents in California who meet the above requirements can continue to be classified as independent contractors.

If you have any questions related to AB 5 and classifications of workers, please contact us. Our attorneys are well versed in the law and can provide you with a consultation.

Have you thought about getting a second look by Attorneys who practice real estate and real estate financing? Contact our full-service, real estate law firm today.