What Should You Know About Misclassified Real Estate Worker?

If you are in the real estate industry, you must have heard about misclassified real estate worker. Misclassifying the employees as independent contractors is one of the serious problems and the most affected group comprises probably real estate agents. For the employee, being misclassified carries severe problems. You may find that the broker is making deductions, which are not apt if you are independent contractor.

Misclassifying refers to a situation where real estate agencies or brokers misclassify their employees and label them as the independent contractors, which results in denial of the critical benefits of employees.

real estate

A real estate agency requires the Realtors to spend a huge amount of money to pay for things like brochures, videos, business cards, insurance, and websites. If real estate agent is an employee in real, the agency is legally bound to reimburse the amount, which can be several thousand dollars per year.

How are Independent Contractors Different From Employees?

It may be difficult to ascertain what your proper classification is. There is no clear line. You may have independent contractor agreement, but, as per National Association of Realtors, this does not prove that you are independent contractor by itself. The court will look at several factors depending on situation. There may be various tests used depending on whether the problem is a wage dispute regarding overtime or federal tax issue.

Independent contractors should be independent. Thus, the more control an employer exerts over a worker, the more likely the worker should be considered as an employee and so, they are entitled to a broad range of benefits given to the employees. While there are not set factors that qualify a worker as an independent contractor or employee, some factors that serve as degree of independence and control are –

·         If the business is providing training to the worker

·         If the employer exercises control over how the work outcomes are achieved

·         Instructions given to the worker, such as, where and when to work, where to buy services and supplies, what equipment or tools to use, what work should be performed, etc.

·         Written contracts describing relationship the parties wish to create, including the duties and tasks worker agrees to perform

·         Permanency of the relationship

·         Whether the worker offers services outside the usual course of the employer or places of business. If they do not, they look like the employee

·         Whether the person is free of control and direction of the realtor. If the worker is independent contractor, then realtor should be focused on whether a house sells and nothing else

·         Whether the person has an independent occupation, trade, or business. If they do, then that person probably is not an employee and must not be treated as one

·         The degree of which services performed by worker are an important aspect of regular business of a company

·         The extent to which worker has unreimbursed expenses of the business, including whether there are current costs that would incur whether or not the work is being performed


Independent contractors and employees are often misclassified in the real estate business. Until and unless there is a contract signed stating the position of the worker, determining whether a worker is an employee or independent contract remains an issue of debate. However, with the factors mentioned above, a worker can know about their real position in the company. 

About Mohit Tater

Mohit is the co-founder and editor of Entrepreneurship Life, a place where entrepreneurs, start-ups, and business owners can find wide ranging information, advice, resources, and tools for starting, running, and growing their businesses.

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