A Realty Times article this morning explains why one REALTOR® believes that the change being considered by California is a good one.
Under Assembly Bill 5, the test to determine who is or is not an Independent Contractor would be clarified.
All of the following would have to be true in order for a worker to be considered independent:
“A) free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact.”
“B) performs work outside the usual course of the hiring entity's business.”
“C) customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hiring entity.”
It looks to me like real estate agents would no longer be considered Independent Contractors.
A) You may be free from direction for the most part, but agents have always been expected to adhere to the company guidelines.
B) Unless you have a side job, which is not the question here, you are NOT performing work outside the usual course of the brokerage’s business. Your work is the core of its business.
C) As far as I know, agents must hang their license with a broker – or be the broker. (I realize the terminology may be wrong here. Some states call all agents brokers and have another name for the one in charge. But I’ll trust that you know what I mean, no matter how your state is set up.)
The point is, agents aren’t free to operate an independent business, separate from any brokerage. If this is not true in some states, do let me know.
Why the push for change? Because some people believe Independent Contractors are treated “unfairly.”
The reason why many in California are pushing for this change is that Independent Contractors (in a wide variety of occupations) have no benefits to fall back on. They have no Worker’s Compensation Insurance and no Unemployment Benefits.They say this is "Not fair!"
Independent Contractors are also required to keep their own books and pay their own Federal, State, and local taxes. That would change. You’d now have withholding taken from every paycheck.
How would your life change if you were no longer an Independent Contractor?
For starters, I’m sure your work habits would depend upon whether you were paid a straight salary, paid by the hour, or were paid a salary plus a commission. How you were paid would also affect how much time and money you were willing to spend on marketing and education.
What if real estate turned into a 9 to 5 job? Where would that leave the home buyers and sellers?
How would this change affect the brokerages?
Their bookkeeping tasks would increase drastically, which might necessitate hiring a full-time bookkeeper.
Their other costs would increase along with it, since they would now be responsible for paying some kind of base salary or wage, plus 50% of your Social Security and Medicare payments, plus unemployment and workers compensation fees.
I would expect that agents would have to meet minimum sales quotas if they wanted to keep their jobs.
No company would want to pay someone who wasn’t producing, so would this move “weed out” all of the low producing agents?
If so, is that a good or bad thing?
Would part-time agents cease to exist?
If you don’t live in California, should you care about this?
Probably. Right now California seems to be the only State considering this change. However, if passed into state law, Assembly Bill 5 could have consequences for workers across the U.S.
We all know about “follow the leader” and “Monkey see, monkey do.”
What’s your opinion?
Is this good for people in some occupations and not in others? If so, which occupations would benefit?
Would it be good for real estate professionals?
Child says "no fair" courtesy of Clare Bloomfield @ freedigitalphotos.net