Real Estate Brokers Need Workers’ Comp, Too

Mortgage and Lending with Olympus Labs

Workers’ compensation may be a policy that independent contractors and real estate agents overlook. Brokers are required to have policies for their contractors or real estate agents as well as the rest of staff.

Labor laws are such that a person that is licensed, despite entering into an independent contractor agreement, is viewed as an employee.

Brokers have:

  •          Licensed staff
  •          Unlicensed staff
  •          Brokers working under their license

As a broker, you must have a workers’ compensation policy for your staff and cannot pass this burden on to your employees. It's illegal to force employees to have their own workers’ comp insurance. If you’re found to be violating these labor laws, you may face:

  •          Fines and civil penalties up to $100,000
  •          A stop order from the Division of Labor Standards Enforcement
  •          Reimbursement claims

Brokers may be forced, by the Division of Labor Standards Enforcement, to stop conducting business. The stoppage will last as long as the broker remains uninsured. There are also stiff penalties, and the reimbursement of premiums to employees and agents for coverage that they may have paid on their own.

But not everyone needs to have workers’ compensation.

If it is a broker-owned firm, the broker may not need to have workers’ compensation. Officers and directors of a corporation can be excluded from coverage, too.

Immediate family members can also be excluded, but they need to be defined as part owner of the business. The following family members can be excluded:

  •          Children
  •          Parents
  •          Spouses

Whether licensed or not, if they’re defined as part owner of the business, they can be excluded from a workers’ comp policy.

Directors and officers may either work directly with the broker or simply collect fees as owners of the corporation. If the directors or officers are only collecting fees, they do not need to have workers’ compensation.

However, if the officers or directors engage in the following or meet the following criteria, they will need to be covered by workers’ compensation:

  •          Services are rendered by the officer or director for a fee
  •          Non-officer owners own the corporation

Workers’ compensation policies are available specifically for real estate professionals. Real restate agencies rely on their agents to help manage listings, show properties and even research property ownership.

Most states require workers’ compensation of some form, so it’s important for every broker to ensure that they’re following their state’s respective laws.

Workers' comp is an important part of every business, and it will protect workers and their business owner, too. Businesses that have insurance will have fewer liabilities. Employees are covered for:

  •          Medical expenses
  •          Wages

While two-thirds of workers that suffer from lower-back pain, for example, are out of work for just one month, 17% are out of work for up to six months. Workers’ compensation will cover wages so that employee livelihoods are protected at this time.

Business owners will have court costs covered in the event that an employee decides to take legal action against the owner of the business.

Unexpected accidents happen every day, and office workers are twice as likely to suffer from a fall than in any other industry. Owners can save money by excluding themselves from a policy, but you’ll need to weigh the risks for yourself. In most cases, coverage for the owner is ideal because the owner is a vital cog in the business’ operation.


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David Jackson, MBA

Financial lending analyst
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