In 2004, the Massachusetts Legislature passed M.G.L. c. 149, § 148B, known as the independent contractor statute, to prevent the misclassification of employees as independent contractors, which would deny them benefits they would otherwise be entitled to as employees.  When originally drafted, the statute was part of legislation aimed at regulating public construction.  As enacted and in practice, the statute is applied far beyond the construction industry and impacts workers in a variety of fields.  In a shift, the Massachusetts Supreme Judicial Court recently limited the statute’s broad application by ruling that the independent contractor statute does not apply to real estate agents.

In Monell v. Boston Pads, LLC, SJC-11661 (Mass., decided June 3, 2015) four licensed real estate agents brought suit against the real estate brokerage firms they worked for alleging they were employees improperly classified as independent contractors.  Under the independent contractor statute, a worker is presumed to be an employee unless the all following factors are present:

• the worker is free from direction and control in how they do their job;
• the service being performed is outside the usual course of business of the employer; and
• the worker is not exclusively working for the employer.

The Court acknowledged that the three factors necessary to be an independent contractor could not be satisfied in light of the restrictions placed on real estate agents under the real estate licensing statute (M.G.L. c. 112, § 87RR).  Licensed real estate agents are prohibited from doing the very things that would qualify them as independent contractors.  This created a conflict between the provision of a specific statute (the real estate licensing statute) and a general statute (the independent contract statute).  In the case of such a conflict, the provisions of a specific statute will be enforced over those of a generally applicable statute.   Accordingly, the Court ruled that the real estate licensing statute governed real estate sales agents and they were not subject to the independent contractor statute.

Had the Court ruled otherwise, essentially all licensed real estate agents would be considered employees under the independent contractor statute.  That would have dramatically changed the current model of independent real estate agents.  The Court did not rule out the possibility that similar claims could be brought on other legal grounds and highlighted the need for the legislature to address the issue.

Stay tuned to On Solid Ground for further updates.