Californian estate agents exempt from minimum wage

Californian estate agents exempt from minimum wage

MAIN IMAGE: Estate agents remain independent contractors under California’s new so-called ‘gig economy’ bill which was passed by the Senate last week.

While bracing for the imminent ‘perfect storm’ when the new Property Practitioners Act will be implemented in conjunction with the National Minimum Wage Act – consider this: in the US estate agents are classified as independent contractors while here, in most cases, our law classifies them as employees.

The South African real estate industry is currently coming to terms with the unexpected revelation that the new National Minimum Wage Act applies to most agencies. While welcomed by some as a means to make it easier for new agents to survive financially during their first year, there are others who are concerned that smaller agencies won’t be able to make ends meet if they have to pay minimum wages to interns who aren’t yet making substantial sales. The financial implications of budgeting for minimum wage will be the end of many smaller agencies they say.

Read: Industry reacts to minimum wage

Currently our law exempts persons from qualifying for minimum wage if they meet the requirements of an independent contractor. However, as it stands our courts “have held that the relationship between estate agent and principal is that of employer and employee, not that of principal and independent contractor” (to quote adv. Kevin Mullins in Minimum wage or maximum earnings?).

However, in California in the US, estate agents don’t meet the legal requirements for a worker as put forward by their ‘ABC’ test (used to determine whether someone should be classified as a worker or an independent contractor).

Read: Real estate agents exempt from California’s new anti-gig labor law

The ‘ABC’ test is part of new legislation aimed at remaking the so-called ‘gig-economy’ which means persons working for ‘gig’ businesses such as Uber and Lyft will soon qualify for minimum wage, health benefits and workplace rights.

Real estate agents, along with insurance agents, doctors, security brokers etc will be exempt from this new law as they don’t meet the requirements of the ‘ABC’ test.

The ABC test has the following conditions that must be met for a person to be classified as an independent contractor:

  1. The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
  2. The person performs work that is outside the usual course of the hiring entity’s business.
  3. The person is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed.

When our Labour courts have to determine whether someone is an employee or an independent contractor, they take the following into account:

  • The object of the contract with the hiring entity – employees render personal services where as independent contractors are contracted to render a service or produce a specified result;
  • Who performs the service – an employee must perform services personally where an independent contractor may usually perform work through others;
  • Is the person only obliged to be subservient to the requirements of the contract or is he under supervision or control of the employer;
  • What terminates the contract –death or when the period of service expires as opposed to the contract ending when a certain service was delivered or product produced;
  • Hours of work – is the person’s hours of work subject to the control or direction of the hiring entity, and has this person worked an average of at least 40 hours per month for the last three months;
  • Does the person form part of the organisation that he works for?;
  • Is the person is economically dependent on the other person for whom he/she works or renders services and is tools of trade or work equipment provided?;
  • Does the person only work for or render services to one person?

Taking the above in consideration, South African courts have held that, despite the commission-based nature of the real estate profession, in most cases an employment relationship exists between an estate agent and an estate agency even though the agent’s remuneration is solely commission-based.

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