Real Estate Agents – Independent Contractors Versus Employee Status


This issue has been raised many times. Although the majority of states do not require a real estate license (or any for that matter any license except possibly a business license) for the sale of a business, but the similarity is such that business brokers might fall into such legislation. Certainly, those states that do require a license would include business brokers who are now independent contractors.

Agents Can Be Classified as ContractorsBoston Globe

“The Supreme Judicial Court ruled that Massachusetts real estate brokerages can continue to classify their works as independent contractors, ruling against agents who claimed they were treated like traditional employees and should have received hourly pay and benefits. The decision, issued Wednesday, appeared to put to rest concerns among real estate industry groups that brokerages could be on the hook for back payments to their agents, plus damages, and subject to higher expenses going forward. Boston Globe, June 7, 2015.”


When I was president of United Business Investments (UBI) in California during the 70s (that’s the 1970, not the 1870s for inquiring minds), we made the decision to make all of our salespeople employees. Since we had offices in CA, OR, WA, NV, AZ, UT, TX, GA and FL, we felt that it was the safe thing to do. UBI was a subsidiary of a small publicly-held company and had to play by all the rules.

It worked! If my memory is correct this is how we did it. Six of the states required real estate licensing. All of the agents were paid monthly – assuming they had commissions due. If they had commission dollars on the books they could get an advance during the 30 days prior to pay day. We deducted taxes, offered medical insurance, etc. So, at the end of the year their taxes were generally paid – and they could take advantage of very good medical insurance, etc.

We suspect that some of the major real estate firms operate that way today, but not very many. As you can see, it was real estate salespeople who brought the suit. We did not pay an hourly rate, our salespeople worked on a straight commission basis.

It worked! Should you consider it? Yes, it does increase overhead, but it may be a good way to keep the sales staff. Their taxes will have been paid along with social security taxes. You can offer a solid medical insurance, possibly liability insurance, etc.

This subject was an issue years ago and has remained stagnant to our knowledge. We have felt it was coming sooner or later. Based on the Mass ruling, it may not be soon.