California Real Estate: Employee or Independent Contractor - Essay Example

California Real e Employee or Independent contractor Affiliation California Real e Employee or Independent contractor Introduction There has been a major problem when it comes to the distinction between an employee and an independent contractor in relation to real estate agents. The most important factor in determining whether a worker is an employee rather than an independent contractor is that the company has the right to control the manner and the means by which the work should be performed in order to achieve the desired results. Therefore, in instances where an individual to whom the worker renders services maintains the right to exercise control, everywhere such control is not exercised then the relation between the two is that of an employer and an employee. This was established in the case of S.G Borello & Sons, Inc. v. Department of Indus Relations, 48 Cal. 3d 341, 350(1989). Other factors are considered in order to distinguish between an independent contractor and an employee. They include the right of the employee to terminate the worker at will in the sense that in case the employer has the right to terminate the employee if they decide to then it shows that they have control over their activities. Secondly, the engagement partaken by the individual is a distinct business or occupation. Thirdly, the person who provides instrumental tools that should be used in the workplace. Lastly, the mode of payment and the time the individual have to get to work among others. Significance of the study There is a need to differentiate between an employee and an independent contractor mostly because of issues of liability. In that, the employer is vicariously liable for the actions of the employee, but an independent contractor is liable for their own actions. Therefore, understanding the California Real Estate Law will help in bringing out this distinction. Additionally, the study will seek to bring out the instances or to what extent can the real estate agents be identified as independent contractors. For example, brokers cannot limit the liability they owe to the third parties for the actions of the agents by requesting to classify them as independent contractors. However, brokers, on the other hand, may agree with their agents that they are independent contractors, but not their employees for other purposes. Hence, understanding this area of study is important for psychology of language as the two terms are confusing to most people. Literature Review The California Real Estate Law draws a clear distinction between an employee and an independent contractor. However, the agents have found ways to escape from liability in that in California real estate agents can work under the employee statutes, but most of them choose to work with the independent contractor model. For the brokerage firms, it creates a great appeal because it reduces their paperwork and relieves them from responsibility for various things such as unemployment insurance and payroll withholding (Bovett & St, 2002). Many advantages came with being independent contractors because such agents and brokers have to their own boss and enjoy various perceived benefits that are provided under Schedule C deductions. The Federal law (26 U.S.C. § 3508 (b)) for the purposes of paying taxes, real estate agents will not be treated as employees in case they met the 3-part test first, the agent must be licensed. Secondly, all substantial payments should be made on the basis of output or sales, but not depending on the working hours (Haupt & Rockwell, 2006). Lastly, a written contract should be provided to the company and the agent providing that in case of federal tax tenacities, the agent will not be treated as a worker. The California law provides the same under the Employment Insurance Code § 650 and Business and Professions Code § 10032(b). Conversely, the California law on real estate does not provide that the agents can be treated as independent contractors for instances even in situations where they have fulfilled the 3-part test. This means that the California firms have to carry worker’s compensation insurance for the agents even though they an independent contract agreement (Crane, 2007). Additionally, the broker’s liability cannot be limited to third parties for the agent’s actions by making a claim that the agents are independent contractors. The fact that the real estate agents have been classified as statutory nonemployees has allowed them to work as both employees and independent contractors (Pivar & Bruss, 2003). This means that the IRS already classify them as independent contractors, therefore, giving them special exceptions no matter how many jobs they hold. This exception has allowed many agents and brokers to hold more than two jobs, but a question that is posed is whether the agents or brokers are using their status to escape from liability (Anderson, Otto & Pivar, 2000). Thus, a conflict is created when it comes to assessing the broker-associate relationship, as well as, real estate license laws and state labor law. The case of Bararsani v. Coldwell Banker Real Estate Brokerage Company provided a proper classification of real estate agents as independent contractors and not employees. The question of whether real estate agents are employees or independent contractors has not been properly provided for because there is a conflict when it comes to the 3-part test. This shows that there is insufficient background study to cater for these issues, which need to be clearly addressed. A question that needs to be answered is whether in case the real estate agents take the employee status they should be treated as such. Secondly, understand whether it is correct for the real estate agents to act as both independent contractors and employees. Rationale of the Study In case a real estate agent chooses to be an employee then they should be treated to such extent as an employee where the employer controls their work schedule. Additionally, in case they choose the status of independent contractors, then they should be liable for their actions. However, in case they take both statuses to some extent they will be running from liability. Research questions 1. Are the real estate agents violating any laws by acting as both employees and independent contractors? 2. Do the California Laws provide adequately on issues of real estate? The research questions relate to issue in question in the sense that they help in distinguishing between independent contractors and employees. The study will try explain the concept of the independent contractor and an employee helping in creating an understanding of the two concepts and removing the conflict that surrounds the two. In case the hypothesis is confirmed, it will be shown that the two are very different, and there is no relationship between them. Method and Design The method that will be used to test the hypothesis in this study is the qualitative study where interviews and questionnaires will be used to collect data. This method is appropriate for data collection because of the first-hand information that will be provided by the real estate agents. The participants in this research will include real estate agents and some IRS officials. The reason for using IRS officials is to have a clear understanding of the laws used in California in relation to real estate. The real estate agents will bring out a clear understanding of the status of the employee and independent contractor. The sample population will include people between the ages of 28 and 35, and have an English background. There are no participants that will be excluded from the study to prevent the results from being biased. The data collected from the participants will be analyzed using charts and graphs in order to provide a clear understanding of the issues at hand. The kind of results that would confirm the hypothesis of the study would positive in that the participants would draw a clear conclusion on the research questions. The results that would disconfirm the studies hypothesis are those that do not show a clear relationship between the research question and the answers provided by the participants. Conclusion Understanding the California laws on real estate will help in improving the field, and it will bring out a clear understanding of the conflicts surrounding the laws. Additionally, considering that not many studies have been conducted in the area it will shed some light on the relevance of having a distinction between independent contractors and employees in relation to real estate. This study is also important as it will reduce the conflicts of law, as the readers will understand what the federal and state laws provide this field. References Anderson, L., Otto, D. S., & Pivar, W. H. (2000). California real estate practice. Chicago, Ill: Real Estate Education Co. Bovett, D. D., & St, C. S. C. (2002). California workers compensation law and practice. Costa Mesa, CA: James Pub. Crane, F. (2007). California real estate property management. Irvine, CA: Zyrus Press. Haupt, K. J., & Rockwell, D. L. (2006). Principles of California real estate. Bellevue, WA: Rockwell Pub. Co. Pivar, W. H., & Bruss, R. (2003). California real estate law. Chicago: Dearborn Real Estate Education. S.G Borello & Sons, Inc. v. Department of Indus Relations, 48 Cal. 3d 341, 350(1989) The Federal law (26 U.S.C. § 3508 (b) Read More