The state’s top court has ruled that Massachusetts real estate brokerages can continue to classify their workers as independent contractors, ruling against agents who claimed they were treated like traditional employees and should have received hourly pay and benefits.
The Supreme Judicial Court decision, issued Wednesday, appeared to put to rest concerns among real estate industry groups that brokerages could be on the hook for huge back payments to their agents, plus damages, and subject to higher expenses going forward.
Attorneys for the defendants said they were pleased.
“The vast majority, probably close to 90 percent or more of real estate brokers nationally, have their affiliated agents work as independent contractors,” said Robert Kutner, a partner at Casner & Edwards LLP who represented the owners of several brokerages sued by their agents. “This maintains the status quo.”
In the case, contract real estate agents who were paid only in commissions sued their bosses, claiming their work conditions qualified them as full-fledged employees who should have received wages and benefits. According to their attorney, the agents were closely supervised by managers during mandatory office shifts and made to answer phones and take out trash. As independent contractors, they also paid monthly and daily fees to the brokerages for services like having their listings re-posted each day on Craigslist.
The dispute centered on two conflicting state laws. One says workers should be treated as employees, not contractors, unless they are free to work at their own direction and specialize in a trade outside of the company’s normal business. But another state law on real estate licensing says workers can be either independent contractors or normal employees.
The SJC decision was based largely on legal precedents, affirming a lower court’s ruling that the industry was governed by the more recent real estate statute.
Neil Markson, a real estate attorney at Bernkopf Goodman LLP who has followed the case, said the ruling was largely expected. After all — and as the court’s written decision notes — a ruling favoring the agents would have called into question the longstanding and ubiquitous brokerage model and could have led to hefty penalties against companies that were complying with the real estate law.
However, Markson noted, the SJC pointedly avoided saying whether agents ought to be employees or contractors.
“They left it open as to whether or not these people could still be employees under other standards,” Markson said.
Hillary Schwab, an attorney at the firm Fair Work who represented the agents, hinted she may pursue claims for her clients under other protections in Massachusetts law.
“I am disappointed by the decision, and I don’t agree with it,” Schwab said. “But I’m pleased that the court recognized in its ruling that a wage claim could potentially still survive against a real estate company that treats its workers like employees, even if on paper it classifies them as independent contractors.”
The SJC suggested the Legislature clarify the real estate statute and make clear which workers at real estate firms are employees — a tricky issue the justices seemed reluctant to tackle.
“In light of the potential impact . . . on the real estate industry as a whole and its significant ramifications for real estate salespersons’ access to the rights and benefits of employment,” the court said, “we think it prudent to leave that issue’s resolution to another day, when it has been fully briefed and argued.”