Three former Keller Williams agents are suing the company over a recent change to its profit-sharing program, claiming that recent changes to profit-sharing programs that reduce payments to certain agents violate contracts—and the law.
Robert E. Hill, David L. Bueker and Jerri L. Moulder filed seemingly separate, class-action lawsuits in three different federal courts within days of each other, all making essentially the same allegations—that Keller Williams initially promised permanent profit-sharing for recruiting agents, then reneged on the deal.
According to the three complaints—all filed by the same attorneys—Keller Williams initially promised that agents who received vested profit-sharing from recruiting other agents to the company would continue to receive payments regardless of their future affiliation.
But in 2019, the company realized it was paying between $25 and $40 million a year to former agents who were now “directly competing” with Keller Williams under other companies, according to the complaints. Keller Williams eventually voted to change the terms of the agreement, tweaking the language in the contract and massively reducing the amount of profit-sharing received by competitors from 100% to 5%.
That change was announced last summer, and is set to go into effect on July 1 of this year. Hill, Bueker and Moulder are all seeking to certify a national class of those affected by the alleged breach of contract—or if that is denied, a state-wide class in the relevant jurisdictions (Kansas for Hill, and Missouri for Bueker and Moulder).
Keller WIlliams spokesperson Darryl Frost said the company had not yet been served with this lawsuit, but confirmed the company was making changes to the profit-share programs and reducing payments to agents who “actively” compete with the company after leaving.
“Importantly, this change does not enrich Keller Williams Realty, Inc.—these funds continue to enrich only affiliated real estate agents, investors, brokers and staff,” Frost added.
But the complaints allege that a new clause in the contract allows Keller Williams to use profit-sharing monies to defend the new policy in court, including “attorneys’ fees, expenses, sums of money, debts, interest, losses, damages, settlements, fines, penalties, assessment and judgments incurred, levied or resulting from any claims or disputes relating to the Profit Share program”—seemingly an admission that legal challenges to the changes were likely.
Founded in the 1980s, Keller Williams has offered a unique brokerage model, with heavy focus on recruiting other agents to the company, with extensive “uplines” and “downlines” that allow associates to share portions of sales profits. It claims it has paid out over $1.5 billion to agents and former agents as of last year through the profit-sharing program, and that “profitable” franchises share about 50% of monthly profits with agents.
According to the lawsuits, the original contracts signed by Bueker, Hill and Moulder all explicitly stated that profit-sharing was not contingent on continued affiliation with Keller Williams, and that the company could not terminate or amend the terms of the contract as it applied to those who were already “vested.”
“Prior to August 2023, for (Hill) and other individuals with an Anniversary Date on or before April 1, 2020, the Profit Sharing Program did not have any limitation or restriction on competition with or against Keller Williams after departure from Keller Williams,” reads Hill’s complaint. “As a result of the breach of contract by defendant Keller Williams, (Hill) and Class Members or Sub-Class Members suffered economic damages.”
According to the lawsuits, the definition of an agent who is “competing” and will have their profit-sharing reduced is extremely broad. It includes anyone “currently an owner, contractor, employee or affiliate of a non-Keller Williams brokerage.”
Additionally, “persons who directly or indirectly (attempt) to induce an associate, staff member or owner of any Keller Williams brokerage to affiliate with a non-Keller Williams brokerage” are also set to have their profit-sharing reduced.
That second clause could seemingly include those no longer actively working as real estate agents—although Frost did say explicitly that the new policy “will not affect agents that retire or leave the real estate brokerage business.”
Another notable exception to the change—every agent who is set to have their profit-sharing reduced is being offered a six month window to re-join Keller Williams and continue to receive the full amounts.
The three plaintiffs are also seeking a preliminary injunction preventing Keller Williams from “redistribution of disputed payments” until the lawsuit is resolved
Ouch! That’s embarrassing for KW. These multi-level schemes can come back to bite you where it hurts, in the greedy bank accounts of corporate America. I would seriously consider firing the individual who put such an incentive program together without seeing the potential for a problem with members leaving the company. What are you thinking? This is where the Amway experience would have fared well for KW.