The Effect of Dynamex Operations West, Inc. v. Superior Court on Worker Classification for Real Estate Brokers and Salespersons
Jason S. Murai
Jason S. Murai is an associate with Hoge Fenton in the firm’s Real Estate practice group. Mr. Murai has extensive experience with residential and commercial real estate transactions, including purchase and sale agreements, leases, and easements. He also handles real estate litigation such as nondisclosure, fraud, breach of fiduciary duty, breach of contract, and lease disputes. Before joining Hoge Fenton, Mr. Murai was in-house counsel for a prominent real estate brokerage. He is admitted to practice law in California, Washington, and Hawaii.
A new ruling from the California Supreme Court has the potential to ignite a new wave of litigation involving the independent contractor vs. employee issue in the real estate brokerage industry. In Dynamex Operations West, Inc. v. Superior Court ("Dynamex"), the court established a new test that, if applicable to the real estate industry, will make it more difficult for real estate brokers to classify salespersons as independent contractors under certain wage and hours laws.1
Real estate salespersons have traditionally been classified as commissioned independent contractors of the supervising real estate broker, rather than salaried employees of the broker. One exception is Redfin, a real estate brokerage operating in several states, including California, that bills itself as a non-traditional broker because it treats its real estate salespersons as employees who earn a salary, rather than independent contractors who get paid on commission.2 As a result of Dynamex, the Redfin model of treating salespersons as employees may end up being the new normal for real estate brokers in California.