(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the
convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the
interests of brevity, portions of any opinion may not have been summarized).
Argued October 25, 1999 -- Decided January 27, 2000
COLEMAN, J., writing for a unanimous Court.
The primary issue raised in this appeal is whether licensed real estate salespersons should be considered
employees or independent contractors for purposes of computing workers' compensation insurance premiums.
Various insurance companies that provided workers' compensation insurance coverage to several of
Re/Max's subfranchisers located in New Jersey determined that Re/Max's real estate agents working in New Jersey
were employees for purposes of collecting premiums under the Workers' Compensation Act (the Act). The
insurance companies had reached that determination based on the Workers' Compensation Manual, the Workers'
Compensation Act, cases construing the Act, and the New Jersey Real Estate Brokers and Salesmen Act. Re/Max
challenged the insurers determination, contending that its sales agents were independent contractors and not
employees.
In support of its position, Re/Max pointed to several aspects of its relationship with its agents, which did not
track the traditional relationship between broker and agent. Among those aspects was the fact that Re/Max agents
were entitled to keep one hundred percent of their commissions, with no obligation to share it with the broker. In
addition, the agents were not required to work any specific amount of hours or to keep designated schedules. Rather,
they were free to set their own schedules and determine their own hours. In return, sales agents were required to pay
to Re/Max a variety of fees and expenses , including a monthly management fee representing a proportionate share
of the office expenses.
In a published opinion, the Chancery Division upheld the insurers' right to collect the premiums. In
reaching the determination that real estate agents were employees within the meaning of the Act, the Chancery
Division applied both the “control test” and the “relative nature of the work test.” Under the control test, the trial
court found compelling the fact that the agents were required to comply with an elaborate set of guidelines and
quality controls set by Re/Max and by the fact that it was Re/Max brokers that supplied the listings, office, phones,
and other services needed to implement an agent's sales efforts. Under the “relative nature of the work test,” the
trial court concluded that the agents were economically dependent on Re/Max because the broker provided the
necessary services to enable the sales agents to function. It further concluded that the agents were employees based
on their obligation to work exclusively for Re/Max.
The Appellate Division affirmed substantially for the reasons expressed by the trial court.
The Supreme Court granted Re/Max's petition for certification.
HELD: For purposes of computing workers' compensation insurance premiums, licensed real estate sales agents
working under Re/Max's program are employees of Re/Max rather than independent contractors.
1. In many jurisdictions, as in the New Jersey, the determination whether a real estate sales agent is an employee or
an independent contractor is regulated by licensing statutes. The New Jersey Real Estate Brokers and Salesmen Act
(Brokers Act) defines a real estate agent or salesperson as an employee of the broker. (pp. 7-8)
2. To further the objective of the Brokers Act, which is to protect the public, the Brokers Act charges brokers with
the duty to supervise and control sales agents, and further characterizes the relationship between brokers and sales
agents as employer-employee. (pp. 8-9)
3. The innovative structure created by the Re/Max agreement is simply a sophisticated attempt to thwart the
employer-employee relationship established as a matter of public policy under the Brokers Act and the
implementation of the Workers' Compensation Act. (pp. 9-10)
Judgment of the Appellate Division is AFFIRMED.
CHIEF JUSTICE PORITZ and JUSTICES O'HERN, GARIBALDI, STEIN, LONG, and
VERNIERO join in JUSTICE COLEMAN's opinion.
SUPREME COURT OF NEW JERSEY
A-
77 September Term 1998
RE/MAX OF NEW JERSEY, INC., a
corporation of the State of New
Jersey; FOCUS REAL ESTATE, INC.
t/a RE/MAX RESULTS REAL ESTATE;
LADEN CORP. t/a RE/MAX REALTY
EXPERTS, RE/MAX FUTURE REAL ESTATE
PROFESSIONALS, INC., O. HERRARA,
INC. t/a VILLA REALTORS,
Plaintiffs-Appellants,
v.
WAUSAU INSURANCE COMPANIES; AETNA
LIFE & CASUALTY and NEW JERSEY RE
INSURANCE COMPANY,
Defendants-Respondents,
and
PENNSYLVANIA NATIONAL INSURANCE
COMPANY,
Defendant.
THE TRAVELERS INSURANCE COMPANY,
Plaintiff-Respondent,
v.
COMPREHENSIVE REALTY COMPANY t/a
RE/MAX TRI COUNTY,
Defendant-Appellant.
Argued October 25, 1999-- Decided January 27, 2000
On certification to the Superior Court,
Appellate Division, whose opinion is reported
at
316 N.J. Super. 514 (1998).
Mark G. Schwartz argued the cause for
appellants (Westmoreland, Vesper & Schwartz,
attorneys; Mr. Schwartz and Katherine M.
Morris, on the brief).
Robert J. Kelly argued the cause for
respondent New Jersey Re-Insurance Company
(McElroy, Deutsch & Mulvaney, attorneys; Mr.
Kelly, William T. McElroy and John T. Coyne,
on the brief).
Jonathan M. Kuller argued the cause for
respondents Wausau Insurance Companies, Aetna
Life & Casualty and The Travelers Insurance
Company (L'Abbate, Balkan, Colavita &
Contini, attorneys).
James E. Patterson argued the cause for
amicus curiae, New Jersey Association of
Realtors (Greenbaum, Rowe, Smith, Ravin,
Davis & Himmel, attorneys).
The opinion of the Court was delivered by
Coleman, J.
The primary issue raised in this appeal is whether licensed
real estate salespersons should be considered employees or
independent contractors for purposes of computing workers'
compensation insurance premiums. The Compensation Rating and
Inspection Bureau, whose function it is to establish the
classification of risks, base rates, system of merit or schedule
rating and premiums to be charged based on those risks, N.J.S.A.
34:15-88 and -89, has deemed that real estate salespersons may be
employees, and that for premium purposes, should be classified as
8742, “Real Estate Agency _ Outside Employees & Collectors.” New
Jersey Workers' Compensation and Employers Liability Insurance
Manual (Workers' Compensation Manual), § 3.3-26(c). Relying on
the Workers' Compensation Manual, the Workers' Compensation Act,
N.J.S.A. 34:15-1 to -128 (Act), cases construing the Act, and the
New Jersey Real Estate Brokers and Salesmen Act, N.J.S.A. 45:15-1
to -29.5, various insurance companies that provided workers'
compensation insurance coverage to several plaintiff
subfranchisers located in New Jersey determined that plaintiffs'
real estate agents working in New Jersey were employees for
purposes of collecting premiums under the Act. Plaintiffs
challenged those determinations. In a published opinion, Judge
Gibson, sitting in the Chancery Division, General Equity, upheld
the insurance companies' right to collect the premiums.
304 N.J.
Super. 59, 69 (1997). The Appellate Division affirmed
substantially for the reasons expressed by the trial court.
316 N.J. Super. 514, 516 (1998). We granted certification,
160 N.J. 89 (1999).
The relevant facts, which we adopt, were succinctly summarized by the trial court:
Plaintiff, Re/Max of New Jersey, Inc. (hereafter Re/Max) is a subfranchiser of Re/Max International Inc. The various Re/Max offices in New Jersey are franchisees of Re/Max of New Jersey. All are engaged in the business of providing real estate services to the public. Defendants, Employers Insurance of Wausau, Aetna Life & Casualty, Travelers Insurance Company, New Jersey Re-Insurance Company and Pennsylvania Insurance Company (hereafter carriers) are the insurance companies which service the Re/Max offices. At some point, each of those carriers determined that Re/Max agents should be considered employees for purposes of the workers' compensation act and began to charge premiums accordingly. Plaintiffs objected and contended that the agents were independent contractors. Unable to resolve those differences, this action was instituted.
Each of the Re/Max offices in New Jersey
consists of a licensed broker and at least
one sales agent. As part of the franchise
agreement, all Re/Max brokers are required to
have their sales agents sign an “Independent
Contractor Agreement” which sets forth their
rights and obligations and contains a variety
of provisions intended to underscore the
agents' independent contractor status.
Included among those provisions is the
agent's right to set his own hours, engage in
his own advertising and to enjoy the benefits
of the so-called “100" Concept”. Under the
100" Concept, Re/Max agents are entitled to
retain the entire commission earned from any
sale rather than splitting the commission
with the broker, as is common in other real
estate agencies. In consideration of the
agent's services and the fees paid, the
broker agrees to make available, on a non
exclusive basis, office and desk space plus
access to listings, forms, telephone and
other means of communication.
Although Re/Max agents are not required
to share a commission, the agents are
obligated to pay to the broker a variety of
fees and expenses. Those sums include a
security deposit, a one-time initiation fee
and a monthly management fee representing a
proportionate share of the office expenses.
The office expenses include so-called fixed
expenses (proportionately shared among the
agents), miscellaneous shared expenses and
finally personal expenses such as postage and
advertising. The actual amount of the
monthly expenses may vary from agent to agent
and from month to month. At times,
individual agents may not generate enough
sales to meet their monthly expenses
obligations. To accommodate those
situations, Re/Max offers an Alternative
Payment Program which allows agents to reduce
the amount they need to pay toward monthly
expenses by taking an advance against future
commissions.
Re/Max agents generally work full time,
but they are not compelled to spend any
minimum amount of “floor time” in the office.
They also supply their own vehicle and
control their own advertising but all
advertising must include the Re/Max logo and
name and conform with other guidelines.
Franchisees hold regular meetings to inform
agents regarding real estate topics, but
attendance is voluntary. Agents are also
required to maintain their personal
appearance and provide dependable, efficient,
courteous and professional service and Re/Max
retains the right to immediately terminate
any agent for cause; either party may
terminate without cause upon sixty days
written notice.
All Re/Max agents agree to work
exclusively for the Re/Max office, to
maintain loyalty to Re/Max and to abide by
the various statutory requirements of the
Real Estate Brokers and Salesman Act.
N.J.S.A. 45:15-1 through -29.5.
[Re/Max, supra, 304 N.J. Super. at 62-64.]
The trial court applied both the “control test” and the
“relative nature of the work test” in determining whether real
estate agents are employees within the meaning of the Act,
N.J.S.A. 34:15-36. Id. at 65-66. In concluding that the sales
agents are employees under the control test, the trial court
found compelling that the agents are required to “comply with an
elaborate set of guidelines and quality controls. . . . [T]he
written contract makes it clear that the agents are subject to
the supervision and control of Re/Max and/or their local broker.
. . . [Furthermore], it is the Re/Max brokers that supply the
listings, office, the phones, and other services needed to
implement an agent's sales efforts.” Id. at 66.
Under the “relative nature of the work test,” the trial
court also found the agents to be employees. Id. at 68. The
court concluded that the agents were economically-dependent upon
Re/Max because “[t]he broker provides the listings, the office,
the equipment and the support staff. In addition, the agents
work for the Re/Max office exclusively. . . . [T]he agents'
dependence has a statutory basis. For example, under N.J.S.A.
45:15-3, it is only the broker that can lawfully enforce a
client's obligation to pay commission.” Ibid.
We now affirm the determination that the sales agents are
employees of Re/Max rather than independent contractors,
substantially for the reasons expressed by the Chancery Division.
We add the following comments.
In many jurisdictions, the determination whether a real
estate sales agent is an employee or an independent contractor is
regulated by licensing statutes. See Edwards v. Caulfield,
560 So.2d 364, 370 (Fla. Dist. Ct. App. 1990); Commonwealth v.
Savage,
583 N.E.2d 276, 278 (Mass. App. Ct. 1991). The statutes
of those states typically provide that if compensation is based
solely on commission, either the sales agent is conclusively an
independent contractor or that an employer-employee relationship
should not be inferred. Other jurisdictions have taken the
opposite approach. See, e.g., Hughes v. Industrial Comm'n,
558 P.2d 11, 13-14 (Ariz. 1976) (interpreting real estate licensing
statute as creating employer-employee relationship for purposes
of state's Workers' Compensation Act); Faith Realty & Dev. Co. v.
Industrial Comm'n,
460 P.2d 228, 230 (Colo. 1969) (same). The
statutes of those states refer to real estate sales agents as
employees of the brokers. New Jersey has had a statute since
1921, L. 1921, c. 141, § 1, as amended, that is similar to those
enacted in Arizona and Colorado.
The New Jersey Real Estate Brokers and Salesmen Act,
N.J.S.A. 45:15-1 to -29.5 (Brokers Act), defines a real estate
agent or salesperson as an employee of the broker. It provides
that a real estate agent or salesperson is one “who, for
compensation, valuable consideration or commission, or other
things of value, . . . is employed by and operates under the
supervision of a licensed real estate broker to sell or offer to
sell, buy or offer to buy or negotiate the purchase, sale or
exchange of real estate. . . .” N.J.S.A. 45:15-3 (emphasis
added). Consistent with the legislative mandate that real estate
salespersons are employees of the broker, the statute restricts
the filing of claims for compensation on brokered transactions to
brokers exclusively. Ibid. In addition, the Brokers Act
prohibits a real estate salesperson from accepting compensation
for the performance of his or her work “from any person except
his employer, who must be a licensed real estate broker.”
N.J.S.A. 45:15-16.
The Brokers Act is designed to protect the public. Tobias
v. Comco/America, Inc.,
96 N.J. 173, 180 (1984). To further that
objective, the Brokers Act charges brokers with the duty to
supervise and control sales agents. To best achieve that
objective, the statutory scheme that creates and governs the
relationship between brokers and real estate agents or
salespersons characterizes that relationship as employer
employee.
To ensure that the public is protected under that
legislatively-mandated employer-employee relationship, the
Legislature has directed that the salesperson's license “shall be
kept by the broker by whom such real estate licensee is
employed.” N.J.S.A. 45:15-14. Whenever a real estate
salesperson resigns or is terminated by the broker, the broker,
as the employer, is obligated to notify the licensing authority,
the New Jersey Real Estate Commission, within five business days.
Ibid. The supervisory responsibility of the broker required by
statute is so significant that, following a termination or
resignation, a salesperson cannot work again until he or she “has
obtained employment with another licensed broker.” Ibid..
Consequently, under the regulated scheme mandated by the Brokers
Act, brokers are in the business of selling real estate, and the
real estate agents are an integral, but not an independent, part
of that business activity. Viewed in that context, the Re/Max
“100" concept” and the slogan that the agents are “in business
for yourself but not by yourself” are, at the very least,
misleading, if not inconsistent with the Brokers Act.
We hold that the innovative structure created by the Re/Max
agreement is simply another sophisticated attempt to thwart the
employer-employee relationship established as a matter of public
policy under the Brokers Act and the implementation of the
Workers' Compensation Act. Accordingly, we affirm the judgment
under review holding that the real estate agents are employees of
Re/Max and not independent contractors.
CHIEF JUSTICE PORITZ and JUSTICES O'HERN, GARIBALDI, STEIN,
LONG, and VERNIERO join in JUSTICE COLEMAN's opinion.
NO. A-77 SEPTEMBER TERM 1998
ON APPEAL FROM
ON CERTIFICATION TO Appellate Division, Superior Court
RE/MAX OF NEW JERSEY, INC., a corporation of the State of New
Jersey; FOCUS REAL ESTATE, INC. t/a RE/MAX RESULTS REAL
ESTATE; LADEN CORP. t/a RE/MAX REALTY EXPERTS, RE/MAX
FUTURE REAL ESTATE PROFESSIONALS, INC., O. HERRARA, INC.
t/a VILLA REALTORS,
Plaintiffs-Appellants,
v.
WAUSAU INSURANCE COMPANIES; AETNA LIFE & CASUALTY and
NEW JERSEY RE-INSURANCE COMPANY,
Defendants-Respondents,
and
PENNSYLVANIA NATIONAL INSURANCE COMPANY,
Defendant.
THE TRAVELERS INSURANCE COMPANY,
Plaintiff-Respondent,
v.
COMPREHENSIVE REALTY COMPANY t/a RE/MAX TRI COUNTY,
Defendant-Appellant.
DECIDED January 27, 2000
Chief Justice Poritz PRESIDING
OPINION BY Justice Coleman
DISSENTING OPINION BY