“Does the Independent Contractor Statute Apply to Real Estate Salespersons?”

A few months ago we wrote about a case awaiting decision by the Massachusetts Supreme Judicial Court (SJC) entitled Monell, et al. v. Boston Pads LLC, et al.

June 2015

A few months ago we wrote about a case awaiting decision by the Massachusetts Supreme Judicial Court (“SJC”) entitled Monell, et al. v. Boston Pads LLC, et al., SJC-11661, a case then on appeal from a decision of the Suffolk County Superior Court, holding that the independent contractor statute does not apply to real estate salespersons. Well, the SJC has now spoken, and, although its decision has sparked a degree of celebratory comment in the real estate community, it may be a bit early for the celebrants to pour the champagne. 

Here’s why:

You may recall that this is a case in which the plaintiffs, a group of former real estate salespersons, claimed that the defendants, brokers for and under whom the plaintiffs formerly worked, violated the independent contractor statute, G.L.c. 149, Section 148B, by misclassifying the plaintiffs as independent contractors when they were actually employees.  There is a conflict between that statute and the real estate statute, G.L.c. 112, Section 87RR.  The Superior Court, noting that there is no way a real estate salesperson could achieve independent contractor status under the independent contractor statute and simultaneously comply with the real estate statute, concluded that the two statutes could not be construed together so as to constitute a harmonious whole consistent with the legislative purpose. It held that the more specific real estate statute controlled over the more general independent contractor statute, and that the latter did not apply to real estate salespersons.  Thus, the Superior Court denied the plaintiffs’ motion for partial summary judgment under the count of their complaint alleging a violation of the independent contractor statute and granted summary judgment to the defendants on that count. 

The SJC affirmed the Superior Court’s order denying the plaintiffs’ motion for partial summary judgment and granting partial summary judgment to the defendants.  In doing so, the SJC stated the following:

“ [W]e underscore the limited nature of our holding.  The plaintiffs’ complaint alleged four counts:  the first for misclassification under the independent contractor statute, G. L. c. 149, § 148B; the second for failing to make timely payment of wages and taking improper deductions, under G. L. c.149, § 148; the third for failure to pay the State statutory minimum wage for all hours worked, in violation of G. L. c. 151, §§ 1 et seq.; the fourth for failure to pay time and one-half for hours worked in excess of forty hours per week, in violation of G. L. c. 151, § 1A. … The [Superior Court] judge granted summary judgment only on the first count.  Following the judge’s decision, the plaintiffs dismissed the remaining counts without prejudice in order to pursue this appeal.  Because we agree with the Superior Court judge that the independent contractor statute does not apply to real estate salespersons, we conclude that the judge properly granted summary judgment on the first count: the plaintiffs cannot prevail on a claim based on a statute that does not apply to them. In reaching that conclusion, however, we take no position on whether the plaintiffs in fact are employees or independent contractors, or on how, in the absence of the framework established by the independent contractor statute, it may be determined whether a real estate salesperson is properly classified as an independent contractor or employee.  [Emphasis added.]”

There is more:

“Because the plaintiffs based their argument on appeal on the contention that they are employees under the framework set forth in the independent contractor statute, they did not address how the court should determine the nature of their relationship if the court determines, as we have, that the framework does not apply.  In light of the potential impact of that issue on the real estate industry as a whole and its significant ramifications for real estate salespersons’ access to the rights and benefits of employment, we think it prudent to leave that issue’s resolution to another day, when it has been fully briefed and argued.  [Emphasis added.]  Should the Legislature be so inclined, it may wish to clarify how a real estate salesperson may gain employee status under the real estate licensing statute.”

So what do we know from Monell?  We know that the independent contractor statute does not apply to real estate salespersons.  We do not know whether the plaintiffs were employees or independent contractors. 

We also know this:  Unlike the Superior Court judge, the SJC views the 2010 amendment to the real estate statute (adding language authorizing brokers and salespersons to enter into agreements whereby a real estate salesperson could be paid on a commission-only basis) as “confirming the fact that the affiliation [between the broker and salesperson] may be either as an employee or an independent contractor.”  The amendment “does not reflect an affirmation that a real estate salesperson is an independent contractor.  It reflects an affirmation that the salesperson may be an independent contractor, but he or she may also be an employee. … [W]e conclude that the 2010 amendment simply was intended to address how a real estate salesperson, whether an employee or an independent contractor, could be paid, authorizing payment in the form of commissions only.” 

(The Superior Court judge had concluded that by making the 2010 amendment and leaving the independent contractor statute intact, the Legislature intended that real estate salespersons qualify as independent contractors despite the level of control brokers must exercise over them pursuant to the real estate statute.)

The SJC in Monell invites Beacon Hill to provide clarification. That would be nice.

Stay tuned.


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