Re/Max of New Jersey, Inc. v. Wausau Insurance Companies

162 N.J. 282, 744 A.2d 154 (2000)
  • Opinion Date: January 27, 2000

WORKERS’ COMPENSATION; BROKERS—A real estate brokerage firm that is innovative in structuring a compensation scheme for its salespersons as independent contractors is still to be treated as an employer under workers’ compensation statutes.

An insurance company for a real estate brokerage company determined that, based upon the Workers’ Compensation Manual, the Workers’ Compensation Act, cases construing the Act, and the New Jersey Real Estate Brokers and Salesmen Act, the real estate agents working for the real estate brokerage firm were employees for the purpose of collecting premiums under the Act. The brokerage firm challenged that determination, contending that its sales agents were independent contractors and not employees. In support of the its position, the firm pointed to several aspects of its relationship with its agents which did not track the traditional relationship between broker and agent. One fact was that its agents were entitled to keep 100% of their commissions, with no obligation to share them with the broker. In addition, its agents were not required to work any specific number of hours or keep designated schedules. Instead, the sales agents were required to pay the brokerage firm a variety of fees and expenses, including a monthly management fee representing a proportionate share of the office expenses. The Chancery Division upheld the insurer’s right to collect the premiums, holding that the real estate agents were employees within the meaning of the Act based both upon the “control test” and the “relative nature of the work test.” Under the control test, the lower court found compelling the fact that the agents were required to comply with an elaborate set of guidelines and quality controls and the fact that the brokerage firm supplied the listings, offices, phones, and other services needed to implement an agent’s sales efforts. Under the “relative nature of the work test,” the lower court concluded that the agents were economically dependent on the brokerage firm because the brokerage firm provided the necessary services to enable the sales agents to function. It further concluded the agents were employees because of their obligation to work exclusively for the brokerage firm. The Appellate Division affirmed substantially for the reasons expressed by the lower court. So did the New Jersey Supreme Court. The Supreme Court found that the New Jersey Real Estate Brokers and Salesmen Act defined a real estate agent or salesperson as an employee of the broker. In addition, to further the objectives of that Act, which are to protect the public, the Act charges brokers with the duty to supervise and control sales agents, and further characterizes the relationship between brokers and sales agents as that of employer-employee. Moreover, in the Court’s opinion, the “innovative structure” created by the brokerage-salesperson agreement was simply a sophisticated attempt to thwart both the employer-employee relationship established as a matter of public policy under the Act and the implementation of the Worker’s Compensation Act.