Is Faulty Workmanship an Occurrence?

shutterstock_95374945Add New Jersey to the growing list of jurisdictions adopting a more expansive view of insurance coverage for construction defect claims.

The standard form commercial general liability (CGL) insurance policy provides coverage for those sums that the insured becomes legally obligated to pay as damages of “bodily injury” or “property damage” caused by an “occurrence.”  An “occurrence” is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”  The standard form CGL policy also contains an exclusion for damages to “your work” (the Your Work Exclusion), and, as of the 1986 standard form, an exception to the Your Work Exclusion if the damaged work was performed on the insured’s behalf by a subcontractor (the Subcontractor Exception).

Whether faulty construction workmanship resulting in property damage qualifies as an “occurrence” in a CGL policy is an issue that is litigated regularly.  Courts have varied tremendously in their approach and findings.  Some courts construe the language strictly, holding that defective construction can never be an occurrence because it is not an accident but rather a business risk of the insured contractor.  Other courts take a modified approach, holding that defective construction standing alone is not an occurrence, but faulty workmanship that causes damage to property other than the defective work itself can be deemed as such.  Still other courts make a more liberal application holding that any unintentional defective construction is an occurrence.

The trend has been in favor of coverage, and a decision last month by the New Jersey Supreme Court is the most recent example.  In Cypress Point Condo. Ass’n, Inc. v. Adria Towers, LLC, a condominium association alleged that water infiltration occurring after the project was completed caused mold growth and other damage to the common areas and units.  Distinguishing earlier precedent, the New Jersey Supreme Court held that the alleged damage qualified as an “occurrence” because it was a consequential harm caused by negligent work.  Even if the alleged damages included damage to sections of the work being performed by the insured, the Your Work Exclusion was subsumed by the Subcontractor Exception because the defective work was performed by subcontractors.

The Cypress Point Court noted a “strong recent trend in the case law of most federal circuit and state courts interpreting the term ‘occurrence’ to encompass unanticipated damage to nondefective property resulting from poor workmanship.”  The courts here in Massachusetts have historically taken a narrow interpretation that defective construction is not an accident and hence is not an insurable fortuitous event that qualifies as an occurrence.  It will be interesting to see if Massachusetts follows New Jersey and other states that have trended towards a more expansive interpretation of the CGL policy language, which would greatly benefit contractors defending defect claims.

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What Recent CFPB Rules Mean for the Private Lender

shutterstock_440924311There are many potential advantages to private mortgages, for lenders and borrowers alike.  Borrowers can benefit from lower interest rates, more flexibility in repaying the loan, less paperwork, and fewer closing costs, while lenders can enjoy a steady income stream (if all goes well) and the satisfaction of helping a friend or family member buy a property.  But putting aside the risk of non-payment and prospect of attendant relationship issues, one possibility that just about everybody would put in the “Con” column is exposure to onerous mortgage lending regulations.

So when the Consumer Financial Protection Bureau issued two new rules in the past several years concerning requirements for loan originators and disclosure practices for creditors, many were left wondering (or maybe should have been wondering) if these rules applied to their private lending plans.


In effect since October 3, 2015, the TILA-RESPA Rule establishes new disclosure requirements for most mortgages.  The aim of the rule is to help consumers understand important aspects of, and therefore make informed decisions about, their mortgage loans.  While the rule has caused considerable compliance challenges for many lenders in its inaugural year, the text of the rule provides clear assurance that its requirements do not apply to the family member or friend making a one-time mortgage loan.  Rather, the requirements apply only to “creditors,” meaning those who “regularly extend consumer credit,” and the rule explains, “A person regularly extends consumer credit only if it extended credit… more than 5 times for transactions secured by a dwelling” in the preceding or current calendar year.

Loan Originator Rule

The Loan Originator Rule, on the other hand, does not afford the same level of clarity.  Effective since January 1, 2014, this rule regulates the compensation, qualification, and identification of loan originators.  The rule states that various actions make an organization or individual a loan originator, including arranging a credit transaction, assisting a consumer in applying for credit, offering or negotiating credit terms, making an extension of credit, and more.  The definition is purposely broader than the definitions of loan originator used in earlier regulations, which were limited to those who regularly accepted mortgage loan applications.  While the rule does make certain very specific exceptions, including an exception for certain seller financing transactions and a categorical exemption from the compensation requirements (i.e. how a loan originator can be paid) for creditors that make loans from their own funds, the outer bounds of the rule’s scope remains unclear.

One camp of commentators has adopted a cautious interpretation of the rule, one that understands broadly the language about triggering loan originator actions and takes a dim view of the possibility that other state and federal regulations provide a safe harbor for individuals and entities that do not regularly make mortgage loans.  Although the one-time or infrequent private lender may be a low enforcement priority for the CFPB, this camp concludes, the risk of violating federal loan originator regulations remains.

Others in the legal and financial services communities have taken a different position.  Some contend that the rule only requires compliance with other state and federal laws regarding the license and registration of loan originators.  Under the SAFE Act, for example, the Department of Housing and Urban Development has issued a rule clarifying that only those loan originators that habitually or repetitively engage in the business of loan origination require licensure.  The analog Massachusetts statute is even more specific, exempting from the requirement of licensure those selling their own primary residence and those who make a mortgage loan with an immediate family member (defined as “a spouse, child, step child, adopted child, sibling, step sibling, adopted sibling, parent, step parent, adopted parent, grandparent, or grandchild”).

As the legal landscape continues to shift for institutional lenders and traditional loan originators in the wake of the mortgage crisis, so too does it shift for the aunt looking to offer her niece a low-interest loan for the purchase of the niece’s first house.  No matter how benevolent the intentions, private lenders should take care to understand the evolving rules regarding mortgage loans and the potential compliance risks these loans create.  We recommend seeking counsel on the particular circumstances of your mortgage loan to determine whether any regulatory landmines exist.

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Upset About Your Easement? Why You Might Reconsider Turning to the Zoning Act for Relief

In its recent June 2016 decision in Picard v. Zoning Board of Appeals of Westminster, et al., the SJC held that “a claimed injury to a private easement right [was not] sufficient to confer standing to challenge a zoning determination made by a zoning board of appeals.”  The Court’s analysis centered on the meaning of a “person aggrieved” under the Massachusetts Zoning Act, G.L. c. 40A.  The decision sent a cautionary message to those who would consider challenging a ZBA decision for perceived infringements to their private easement rights: You just might not be the right kind of aggrieved.

A summary of the dispute: The plaintiff had an easement to cross abutting property to access a beach area on a pond.  The owner of the abutting property applied for a building permit to build a home.  Although the abutting property did not meet the town’s minimum buildable area and frontage requirements, the building commissioner determined that the property was a non-conforming lot with grandfathered status under the Zoning Act.  When the ZBA upheld the building commissioner’s finding, the plaintiff filed suit in Superior Court.

The SJC’s decision chronicled the standing requirements under the Zoning Act.  Below are three crucial excerpts:

“[O]nly a ‘person aggrieved’ has standing to challenge a decision of a [ZBA].”

“[T]he right or interest asserted… must be one that the Zoning Act is intended to protect….”

“[T]he analysis is whether the plaintiffs have put forth credible evidence to show that they will be injured or harmed by proposed changes to an abutting property, not whether they simply will be ‘impacted’ by such changes.”

Perhaps the most significant aspect of the Court’s decision, which affirmed the Superior Court’s dismissal of the plaintiff’s complaint for lack of standing, is its narrow interpretation of “interests protected by the applicable zoning scheme.”  The Court reasoned that “[t]he primary purpose of zoning… is the preservation in the public interest of certain neighborhoods against uses which are believed to be deleterious to such neighborhoods,” such as “density, traffic, parking availability, or noise.”  Is it possible that interference with a private easement could also raise these kinds of larger-scale, neighborhood-wide concerns?  The Court did not completely foreclose the possibility, but concluded that, at least in the case at hand, such interference was outside the “scope of concern of the Zoning Act.”  It’s worth noting that the Court also held that, even if the plaintiff’s claims were inside the Zoning Act’s “scope of concern,” the plaintiff still failed to substantiate his claimed injuries, since he offered nothing more than “his own opinion that a building would block access to the pond.”

A rare silver lining to be found in the SJC’s decision for those concerned about infringements to their private easements is that, as the Court pointed out in the final footnote of its decision, “nothing we say here deprives [the plaintiff] of his right to pursue a remedy at common law for any actual harm to his easement rights.”  In other words, if you’re in plaintiff’s shoes, you may be resigned to suing your neighbor, not the ZBA.

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Appeals Court Revisits Adverse Possession of Undeveloped Land

The Massachusetts Appeals Court recently reviewed adverse possession of wild and wooded areas. In Paine v. Sexton, 88 Mass. App. Ct. 389 (2015), the Plaintiff campground operators asserted rights to property based on record title and adverse possession.  While it did not validate record title, the Court recognized the Plaintiffs’ adverse possession claims.  In doing so, the Court departed from the traditional requirements for adverse possession of land in its natural state.  For owners of large tracts of undeveloped land, this case serves as a reminder of the risks posed by adverse possession.

The Paine family has operated a campground on a portion of a 36 acre site in Wellfleet, Massachusetts for over 50 years. This occupied portion of the site includes typical campground improvements: roadways, picnic tables, fire pits, toilet facilities, an office building, fencing and parking areas. But as the Court noted, the areas between campsites and the remainder of the site are undisturbed.

In the traditional sense, adverse possession requires occupancy which is “actual, open, notorious, exclusive and adverse for twenty years.” Ryan v. Stavros, 348 Mass. 251, 262 (1964).  Courts have also required “a more pronounced occupation” for adverse possession of wild and wooded areas.  Sea Pines Condominium II Association v. Steffens, 61 Mass. App. Ct. 838, 848 (2004).  The test for pronounced occupation has often been whether land has been enclosed or cultivated; harvesting timber and pasturing animals alone has not satisfied this burden.  See Senn v. Western Massachusetts Electric Company, 18 Mass. App. Ct. 992, 993 (1984).

In Paine, the Court took a different approach and focused on the Plaintiffs’ specific use: the clearing of sites; construction of buildings and roadways; and restriction of access to paying customers. The Court concluded these steps put record owners on notice of the Plaintiffs’ occupancy and thereby established adverse possession, despite the lack of complete enclosure or cultivation.  Subsequently, the Court recognized the Plaintiffs’ color of title claim to the entire 36 acres after reviewing (but not validating) their purported record title.

The Court’s ruling in Paine departed from the requirement of pronounced occupation for adverse possession of land in its natural state.   At the same time, it confirms the fact-specific nature of these cases and the need for more in claims associated with wild and wooded areas.  For owners of large tracts of undeveloped land, it also serves as a reminder of the importance of vigilance in monitoring unauthorized use and activity.

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MassDEP Offers Manufacturers Amnesty Under Toxics Use Reduction Act, a Likely Prelude to Increased Enforcement

Massachusetts Department of Environmental Protection

If you are a Massachusetts manufacturer suspected of using toxic chemicals in your production process, you may have been among the hundreds of recipients in recent weeks of a notice letter from MassDEP about mandatory chemical use reporting under TURA, G.L. c. 21I.  Passed in 1989, TURA seeks to encourage manufacturers, processors and users of toxic substances to reduce their use.  The regulations require annual reporting of listed chemicals each June and the filing of a toxics use reduction plan every other year if the facility meets certain thresholds.

The regulations are by nature highly technical.  In addition to consulting with legal counsel, you will want the assistance of a certified Toxics Use Reduction Planner.  They can assist you with completing the necessary paperwork and identifying the toxic substances that require reporting each year under TURA.

It will come as no surprise that TURA also requires the payment of an annual fee to MassDEP along with the report.  The fee is based on the number of employees and the amount of listed chemicals manufactured, processed or otherwise used.

If you are not filing an annual report as required under TURA, now is the time to remedy that oversight during the amnesty program, which expires on June 30, 2016.  Under the program, you will be required to identify and report any use of TURA-listed chemicals over the reporting threshold and pay one year of past-owed fees, along with the mandatory $1,000 late fee.   MassDEP will be conducting formal inspections and audits to determine compliance.  Expect significant sanctions, fines and enforcement actions if MassDEP discovers TURA violations after the amnesty program, especially if you are among the lucky recipients of a recent TURA notice from MassDEP.

If you have questions, please contact David McCay, an experienced Massachusetts environmental litigator at Mirick O’Connell at (508) 791-8500, or a certified Toxics Use Reduction Planner, a list of which is maintained by MassDEP and available here:

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Lt. Gov. Polito to Give Keynote at Boroughs+ Economic Development Summit on Jan. 26

WestboroughMirick O’Connell is proud to sponsor the Boroughs+ Economic Development Summit on January 26 at the Doubletree Hotel in Westborough.  The summit will feature a keynote address from Lt. Gov. Karyn Polito, followed by a panel discussion and Q&A.  To register for the summit, click here.

The summit will focus on promoting regional collaboration on the “Last Mile” Connection, which is the connection from major public transit, including commuter rail stations, busing routes, and park and rides, to the business locations where people work. The summit was organized by the economic development organizations and professionals in the towns of Southborough, Northborough, Westborough, Marlborough, Hudson, Hopkinton and the 495/MetroWest Partnership.

David McCay, a partner at Mirick O’Connell specializing in  Land Use and Environmental Litigation, and the Chair of the Southborough Economic Development Committee, will open the summit, followed by Lt. Gov. Polito’s keynote address. A panel discussion will be moderated by Dr. Barry Bluestone, founding director of the Dukakis Center for Urban and Regional Policy and Founding Dean of the School of Public Policy & Urban Affairs at Northeastern University. Panelists include: Ed Carr, Administrator of the MetroWest Regional Transit Authority; Jim Robbins, Westborough Town Planner; Paul Matthews, Executive Director of the 495/MetroWest Partnership;  Bill Spencer of Pall Life Sciences in Westborough; and Marybeth Stewart, Human Resources Manager of Wegmans Food Markets.

“The goal of the Boroughs+ Economic Development Summit is to bring together local leaders to collaborate on important economic development and transit issues that impact the future of the Boroughs+ region,” said McCay. “By working as a team on the local and regional level, we can begin to address the transportation issues that many employers face.”

The Boroughs+ Economic Development Summit will be held on January 26 from 7 a.m. to 9:30 a.m. at the Doubletree Hotel in Westborough.  Click here to register.

Posted in 495/MetroWest Partnership, Economic Development, Marlborough, MetroWest, Northborough, Southborough, Uncategorized, Westborough, Zoning | Tagged , , , , | Leave a comment

Courts Refine Immunity Under the Massachusetts Recreational Use Statute

Private landowners allowing public access to land should take note of recent court decisions which have refined the scope of the Recreational Use Statute, G.L. c. 21, § 17C (“Statute”).  The Massachusetts Legislature enacted the Statute in 1972 in response to liability concerns of property owners and to encourage public access to private property.  Over time, the Statue has proven to be a valuable defense against many premises liability claims.  As a result, property owners should evaluate their land use practices to ensure compliance with the Statute’s procedural requirements.

The Statute affords liability protection to a “person” who allows the public the right to use land for the following purposes: recreational, conservation, scientific, educational, environmental, ecological, research, religious and charitable.  Under the Statute, a “person” includes landowners, agents, managers, licensees, non-profits, trusts, business organizations, officers, directors and trustees.  Of importance to owners of large tracts of land, the Statute’s recreational component covers activities such as hiking, biking, swimming, hunting, fishing and snowmobiling.  It does not, however, protect landowners against gross negligence claims.

Recent decisions underscore the importance of three factors courts analyze when applying the Statute: 1) payment of fees; 2) limitations on public access; and 3) the nature of the public use of land.  Accordingly, property owners should examine the interplay between their land use practices and these factors.

Regarding fees, courts have reaffirmed the principal that charging a fee for public recreational use bars protection under the Statute.  Specifically, they have distinguished this type of fee from donations and reimbursements for marginal costs.  In Marcus v. City of Newton, 462 Mass. 148 (2012), the Supreme Judicial Court denied the City of Newton immunity under the Statute because it charged for use of a municipal field.  However, the Appeals Court in Patterson v. Christ Church in the City of Boston, 85 Mass. App. Ct. 157 (2014), granted immunity from a personal injury claim to Boston’s Old North Church.  The Court held that charges for specialized tours and the operation of an on-site gift shop were not “fees” for recreational use.

With respect to access, the Court in Wilkins v. City of Haverhill, 468 Mass. 86 (2014) emphasized that the Statute requires “free and equal” access for recreational use to all members of the general public.  The Court denied the City of Haverhill immunity from a slip and fall after determining that a school event was only open to a small portion of the general public (parents and students).  Additionally, in Cohen v. Elephant Rock Beach, 2014 WL 6792106 (D. Mass. 2014), the Court denied a private beach club protection under the Statute from a plaintiff’s injuries suffered from use of an offshore rock.   The court determined that the club did not own the rock; it also held that the club restricted access to members and guests.

Courts have also whittled away review of subjective intent in applying immunity, and they have sharpened the inquiry to whether landowners grant access to the public for recreational activity.  The Supreme Judicial Court in Ali v. City of Boston, 441 Mass. 223 (2004), evaluated a plaintiff’s collision with a park gate and held that riding a bike was a recreational activity regardless of the reasons for doing so.  Similarly, the Court in Dunn v. City of Boston, 75 Mass. App. Ct. 556 (2009), granted the City of Boston immunity under the Statute from a plaintiff’s injuries on the stairs at City Hall Plaza.  The Court held that walking around the plaza was inherently a recreational activity, and that the reasons for doing so were not determinative in the immunity analysis.

Landowners allowing public recreational use of land can thus avoid preclusion of immunity under the Statute by incorporating these parameters into their land use practices.  In particular, they should carefully weigh the benefits of generating revenue from access fees against the potential loss of immunity under the Statute.  Additionally, they should evaluate whether access to their land for recreational use is open to all members of the general public.

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The Spearin Doctrine is Alive and Well in Massachusetts

The Tom Brady decision was not the only important decision issued last week.  Attached is a slip opinion of an SJC decision that will help define the role of a construction manager at risk (CMAR) on construction projects in Massachusetts.  The “Spearin Doctrine” is the well-established rule that an owner impliedly warrants to a contractor that architectural plans are sufficient, so that a contractor need only build correctly what is contained in the plans.  In a nutshell, the Superior Court found this doctrine was limited to the traditional design-bid-build context and that because Gilbane, as CMAR, was involved to some extent with project design it therefore shared responsibility for errors and omissions in the design.  The local construction bar was surprised by this decision, and the consensus was it would be reversed to some degree on appeal.  It was.  The SJC held that the Spearin Doctrine does in fact apply in a CMAR context.  However, the SJC noted that the scope of the implied warranty may be less in the CMAR context, and that the greater the CMAR’s design responsibilities, the greater the CMAR’s burden will be to show its reliance on a defective design was reasonable.

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The Complex Web of Insurance Coverage And Construction Losses

ScaffoldingThe Massachusetts Appeals Court recently issued a decision that sheds light on the interplay between multiple insurance policies allegedly covering the same construction project.  The project was a renovation of a second floor bathroom at a home in Medford, Massachusetts.  An employee of the plumber removed old copper piping and other debris from the bathroom and attempted to throw it in the backyard from a second floor deck.  The deck railing however was not securely in place and the plumber’s employee fell to the ground and was injured.  The employee and his wife filed suit against the homeowners and their son.  The homeowners’ son, a licensed electrician, had loosened the railing in order to push the old cast iron bathtub into the backyard and had left the railing in an upright position with the appearance that it was securely in place.

At the time of the accident, the homeowners were insureds under a homeowners’ policy.  Their son was a named insured under the same policy.  The son was also the named insured under a commercial general liability policy in connection with his business as a self-employed electrician.  Both insurance carriers were put on notice of the employee’s claim.  The homeowners’ policy assumed the defense of the parents but refused to defend their son.  The liability policy undertook defense of the son under a reservation of rights.

The liability policy filed a lawsuit seeking to have a court declare its coverage obligations.  The Appeals Court determined that both insurance companies owed a duty to defend the claim, but only the homeowners’ policy owed a duty to indemnify (or pay) the claim because there was no evidence the son was conducting his business as an electrician when the accident occurred.

The decision from the Appeals Court, Preferred Mutual Insurance Company v. Vermont Mutual Insurance Company, 87 Mass. App. Ct. 510 (2015), contains insightful analysis of issues that commonly arise in the universe of construction insurance, including the following:

  • A reminder that an insurer’s duty to defend is independent from, and broader than its duty to indemnify. An insurer has a duty to defend an insured when the allegations in a complaint are “reasonably susceptible” of an interpretation that states or roughly sketches a claim covered by the policy terms.
  • An insurer bears the burden of proving the applicability of a policy exclusion. In order for an exclusion to negate an insurer’s duty to defend, the facts alleged in the complaint must establish that the exclusion applies to all potential liability.
  • Other insurance clauses such as an “excess clause” or a “pro-rata clause” have no bearing on an insurer’s duty to defend, but rather are designed to establish a policy’s relationship with other policies in covering a loss. These provisions speak only to loss allocation among multiple insurers.

The Construction Group here at Mirick O’Connell closely follows court decisions and other laws and regulations that affect the local and regional construction industry.  If you have questions or comments regarding the Preferred Mutual decision in particular or construction insurance generally, please contact one of the members of our Group for assistance.

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BREAKING: Supreme Court Strikes Down New EPA Rules on Mercury Emissions

Power Plant 4In a blow to the Obama Administration’s efforts to phase out coal-fired power plants and encourage energy production from renewable resources, the United States Supreme Court has thrown out the Environmental Protection Agency’s (EPA) new rules requiring coal-fired power plants to cut emissions of mercury and other pollutants.  The fatal flaw in the EPA’s new rules:  the agency failed to properly account for the costs of the new regulations before it adopted them.

The Clean Air Act permits the EPA to regulate power-plant emissions only if it concludes that “regulation is appropriate and necessary” after studying the hazards to public health.  42 U.S.C. § 7412(n)(1)(A).  Justice Antonin Scalia, writing for the 5-4 majority in Michigan v. EPA stated, “[t]he Agency must consider cost—including, most importantly, cost of compliance—before deciding whether regulation is appropriate and necessary.”  The ruling does not prohibit the EPA from promulgating limits on mercury emissions.  However, the agency must first consider the price.  It remains to be seen whether the EPA will be able to do so during President Obama’s remaining term in office.

For more information on this important case or questions on related environmental law issues, please contact David McCay, a Massachusetts real estate and environmental litigator at Mirick O’Connell at (508) 791-8500.

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Massachusetts Earned Sick Time Law Seminar – July 16 at Holy Cross

On July 1, 2015, the Massachusetts Earned Sick Time Law takes effect.  As many of you are aware, the Attorney General’s Office has been busy hosting public hearings concerning their proposed regulations related to the Earned Sick Time Law.  Mirick O’Connell testified at one of the public hearings and has been in close contact with the Attorney General’s Office in order to not only convey client concerns associated with implementation of the new law, but also to better understand the legal landscape related to implementation of the law and the anticipated final regulations.

Now that the public comment period has closed, the Attorney General will be issuing its final regulations, which are expected to be officially released on July 3, 2015.  Once the final regulations are issued, employers will need to ensure that their current policies are updated or that they implement new policies that comply with the new law and regulations.

Please join Mirick O’Connell Attorneys Jonathan Sigel and Corey Higgins for an in-depth discussion of the final regulations and how best to ensure your company is in compliance with the new law.

Is your company ready for the new Massachusetts Earned Sick Time Law?  Do you have questions about the steps your organization needs to take in order to comply with the new law?  If so, please clink on this link to register for our upcoming seminar on the final regulations to the new law Registration Link.  The program begins at 7:30 a.m. on July 16, 2015 at the Hogan Center at the College of the Holy Cross in Worcester.

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Real Estate Agents Not Covered by Independent Contractor Statute

Retail Space for LeaseIn 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.

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