Of the nearly 1.5 million members of the National Association of REALTORS® (NAR), approximately 87% are classified as independent contractors—a classification that is vital to practitioners and the real estate industry.
As independent contractors, real estate professionals are empowered to be entrepreneurs, with maximum flexibility to thrive in a dynamic and flourishing professional field. The enhanced freedom and autonomy allow real estate professionals to work independently and advance their health and financial futures in a manner that best fits their needs.
With the rise of gig economy workers in many different industries, the ability for workers to be classified as independent contractors has come under increased scrutiny, including for real estate professionals. While those working as independent contractors are recognized and protected under many state and even some federal laws, ongoing litigation and new federal and state legislation continue to threaten this status for those in the real estate industry. Such action could result in classification as employees, which raises significant liability and financial concerns for the real estate industry and for other businesses that depend on an independent contractor workforce.
The loss of independence for real estate professionals could jeopardize the ability to serve clients’ real estate needs and, as a result, impact the currently healthy market that is vital to supporting the present economic recovery.
NAR has always advocated for the right of real estate salespeople to work as independent contractors and for brokers to choose to classify agents as independent contractors. Since 1982, real estate professionals have enjoyed an explicit protection in the Internal Revenue Code (I.R.C.), 26 U.S.C. §3508, which provides the framework to be classified as statutory non-employees for federal tax purposes. This decade’s old federal law has also been mirrored in states, ranging from workers’ compensation laws to real estate specific statutes, where each are explicit in qualifying a licensed real estate agent (or salesperson or licensee) as an independent contractor based on certain criteria and/or are expressly permitting the ability of a real estate broker to treat their agents as independent contractors.
Recent pressure to adopt what is known as “the ABC Test” would make it more challenging to classify a real estate professional as an independent contractor. In response, NAR has been educating policymakers about the importance of the independent contractor status within the real estate industry to prevent “employee” reclassification.
While none of the recent federal proposals directly impact the I.R.C. exemption, nor should they preempt existing state laws outlining real estate professionals’ status, it remains a concern that a new federal standard could influence other legislative or regulatory changes and encourage legal challenges to real estate professionals’ ability to be classified as independent contractors.
NAR will continue to remain vigilant and fight for clarity in favor of classifying real estate professionals as independent contractors. This advocacy is bolstered by the federal government’s and many states’ long-standing recognition of the unique nature of the real estate industry and, as such, the need to treat it differently than other industries.
For more on NAR’s efforts to protect the ability of real estate professionals to be classified as independent contractors, visit nar.realtor.
Christie DeSanctis is the director of Business and Conventional Finance Policy for the National Association of REALTORS®.
Interesting. Looking forward to updates
A significant number of real estate professionals are over 50. Many of them are in real estate because of the widespread age discrimination by employers. If older agents lose their independent contractor status and are forced to become employees, they would once again face age discrimination. Removing independent contractor status for real estate agents would result in unemployment of hundreds of thousands of older agents. That’s the last thing our economy and society needs.
I recently completed a doctoral dissertation on the topic of leadership and real estate agents as independent contractors. The voters in CA voted down a proposition that would change classifications yet this is going to be an ongoing challenge and we may have to identify a new type of employee. We must remain aware and vigilant.
why has the CAR turned completely left, using our contributions of which we don’t really get anything plus this is not a union. why are they using our money for lobbying to the left. they wanted all agents to vote for not allowing to pass on property to their children (prop 19), but worded as helping those in fire area’s. complete B.S. anybody that is intelligent knows that the fires and so called climate change are blue ways of getting more money. Do you honestly think that the universe is so a low intelligent energy that we make a difference? the earth is a small planet in a universe that is so vast we can not even comprehend ..but let’s pay taxes because it does not have the intelligence to know it’s self…This CAR and and all the boards we pay are working against the intelligence we are given as human beings and all energy in the world. I am so angry they keep telling us how to vote and feeding lies to a captured group that this is no longer a republic..I say B.S. We must stop the brainwashing and stand up to a great group of people that entered into a profession that offered independence and help to others, not Marxism..I can not believe the way we are going….who are these people that monitor and tell agents how to vote ..food for thought!
The agents would benefit from an hourly wage and benefits. Of course NAR doesn’t want this to change. $$$$$$ oh what a thought. Paying actual wages instead of building business on the backs of these agent’s friends and family. ( the most certain or likely transactions) the average agent closes 1 or fewer transactions per year. Making the average income for these agents below minimum wage.
Why do you think we would benefit? Our write offs would be limited. Our expenses are what help us earn a decent living.
Ditto to comment on age discrimination……