It is often financially advantageous for a company to classify individuals as independent contractors rather than employees, but the individuals lose the benefits and protections afforded to employees. Massachusetts law prohibits the misclassification of employees as independent contractors.
The classification of real estate salespersons as independent contractors was challenged in the recent case of Monell v. Boston Pads, LLC. Several salespersons brought suit on behalf of themselves and others similarly situated against several real estate brokerage firms. The plaintiffs alleged that the defendants had misclassified them as independent contractors in violation of the independent contractor statute. The trial judge found a conflict between the independent contractor statute and the real estate licensing statute. The judge found that the real estate licensing statute, which was more specific and more recently amended, controlled and granted partial summary judgment in favor of the defendants. The plaintiffs appealed.
The independent contractor statute is part of the Wage Act. Pursuant to Massachusetts General Laws c. 149, § 148B, a person performing a service is presumed to be an employee unless he or she meets the three enumerated factors in the statute. A person performing a service is an employee unless he or she is free from control and direction, the service is performed outside the employer’s usual course of business, and the person is customarily engaged in an independently established profession of the same nature as the service.
Massachusetts law requires a real estate salesperson to be licensed and to work with a real estate broker. Massachusetts General Laws c. 11 § 87RR states in part that a salesperson “may be affiliated with a broker either as an employee or as an independent contractor and may, by agreement, be paid as an outside salesperson on a commission-only basis, but shall be under such supervision of said broker….”
The court considered the general rules of statutory interpretation, including plain language and legislative intent. The court also noted that a remedial statute is to be interpreted broadly to accomplish its intended purpose. Furthermore, when two separate statutes relate to the same subject matter, they are to be read together in a way that is consistent with the legislative purpose.
These two statutes, however, could not easily be read harmoniously. A person could not comply with the real estate licensing statute while simultaneously meeting the three requirements to be an independent contractor. Under the real estate statute, a salesperson may only engage in real estate business while acting as a representative of a broker, but the independent contractor statute requires an independent contractor to perform the service outside the usual course of the company’s business and to customarily engage in business independently.
The court found that the real estate statute specifically applied to the real estate salespersons, while the independent contractor statute was more general. The real estate statute specifically allows a real estate salesperson to act as either an independent contractor or an employee. If the court applied the independent contractor statute to real estate salespersons, it would subject brokers to criminal penalties for misclassifying salespersons as independent contractors when the real estate statute specifically allowed them to be independent contractors. Thus, the independent contractor statute was not applicable to real estate salespersons.
The court was careful to clarify the limits of its holding. The plaintiffs had based their appeal on the independent contractor statute. They had not made any argument as to how their relationship should be determined if the court found that the independent contractor statute did not apply. The court therefore declined to make that determination, but it affirmed the trial court’s order granting partial summary judgment in favor of the defendants.
For now, it remains unclear what exactly determines whether a real estate salesperson is an employee or independent contractor. The factors in the independent contractor statute clearly do not apply, but neither the legislature nor the court has provided clear guidance. The court suggested that the legislature may choose to clarify the issue. Otherwise, the court may address the issue in a case in which it has been properly argued and briefed.
If you believe you have been improperly classified as an independent contractor, an experienced Massachusetts employment law attorney can help you. Call the Law Offices of Richard Mucci at (781) 729-3999.