Licensed vs. Unlicensed Assistants
It is wise for every broker to adopt a written policy relating to the hiring and activities of real estate assistants (“assistants”). All salespersons should be made aware of the existence of this policy and given access to a copy of it. It is recommended that the policy include the following issues:
· Whether assistants must be licensed, or if they may be unlicensed.
· What functions an unlicensed assistant may perform.
· Whether assistants must be employees, or if they may be independent contractors.
· Whether assistants may be employees of the salesperson, the broker, or either one.
· The allowed methods of payment of assistants, particularly licensed assistants who must receive payment from the broker for licensed work. Also see number six (6) below. (The policy might suggest or require the use of an outside payroll service to ensure payment for licensed work is being made by the broker).
· Directions regarding any required withholding, insurance coverage (including workers’ compensation and Errors and Omissions), treatment of benefits (such as pension or profit-sharing systems) and other compensation-related issues.
· Any administrative requirements to be imposed, such as filing time records or submitting paperwork to the salesperson or the broker.
· The written agreements that will be required, such as
a) an employment agreement between the assistant and salesperson who employs him/her or an independent contractor agreement between the assistant and the broker or salesperson,
b) an agreement between the broker and salesperson describing the system under which salespersons are permitted to hire assistants and the lines of responsibility and liability for supervision and compensation.
Permitted Work by Licensed and Unlicensed Assistants
With respect to the work to be performed by the assistant, the licensed assistant naturally has much greater latitude in the type of work they can perform on behalf of the broker/salesperson than does the unlicensed assistant. Until 2004, there were significant limitations on what an unlicensed assistant could do under Commerce Department Rules and Minnesota Law. However, effective August 1, 2004, the law was changed such that “A broker may allow any unlicensed person, who is authorized by the broker, to disclose any factual information pertaining to the properties listed by the broker, if the factual information is provided to the unlicensed person in written form by the broker representing or assisting the seller(s)”. (See MN Statute 82.48, Subd. 3(d).) The Minnesota Department of Commerce has stated that unlicensed assistants may assist in hosting an open house, distribute material about the property and take names and phone numbers, but cannot answer questions from consumers unless the answers to those questions are within the information provided on the written statement from the broker as specified in the statute set forth above. The unlicensed assistant cannot draft purchase agreements, take buyers on showings, negotiate on behalf of the buyer or seller or perform any other function that a real estate agent traditionally performs in providing a service to the consumer except the very limited function of providing information as outlined above.
Independent Contractor or Employee
Licensed assistants can perform the same services as the broker or salesperson. The second issue is whether the assistant is an employee or an independent contractor. Normally, a licensed assistant is an independent contractor who is paid a commission. Under Internal Revenue Code 3508(b)(1), real estate agents are considered independent contractors if (a) they are licensed, (b) majority of their compensation is in the form of commissions, and (c) there is a written independent contractor agreement between the broker and the assistant or the salesperson and the assistant. Except for this special provision of the Internal Revenue Code applicable only to real estate agents, the Internal Revenue Service uses a complicated 20 point checklist in determining independent contractor status. The benefit of retaining independent contractor status for licensed persons if the broker is not obligated to pay withholding, social security, worker’s compensation, unemployment compensation or pay the traditional employee benefits such as 401(k), health insurance, etc. Unlicensed assistants are usually employees. First of all, they do not fit within the provisions of the above-cited Internal Revenue Code 3508(b)(1) because they are not licensed. Thus, if they are going to be independent contractors, the broker or salesperson runs the risk that they will have to deal with the complicated 20 point test of the Internal Revenue Service with no certainty that the assistant will be deemed an independent contractor. If the broker/salesperson determines that an employee relationship is the best relationship, the broker/salesperson will have to pay the various costs and benefits outlined above that are a natural ingredient of an employer-employee relationship. That relationship should be defined by an employment contract just as the independent contractor relationship should be defined by an independent contractor agreement.
In addition to the decision whether the assistant is an employee or an independent contractor, the decision must be made whether the assistant’s relationship is with the broker or the salesperson. If the assistant works exclusively for the salesperson, the employee or independent contractor relationship would normally be between the salesperson and the assistant. However, Minnesota law requires that all commissions must be paid by the broker. If more than one salesperson uses the assistant, then the employee or independent contractor relationship would normally be between the broker and the assistant with a separate agreement between the broker and the salespersons using the assistant dealing with issues such as compensation, supervision, control and accountability.
If the assistant is hired by the broker, all compensation, whether commission or salary, is paid by the broker with reimbursement to the broker by the salesperson for the salesperson’s use of the assistant. There should be an employment or independent contractor agreement between the broker and the assistant defining the terms of the relationship along with an agreement between the broker and the salesperson specifying the services of the assistant, compensation and division of responsibility by broker and salesperson over the assistant.
If the salesperson decides upon hiring an unlicensed assistant as his/her exclusive assistant, that relationship would likely be an employer-employee relationship and should be defined by an employment contract. There should be certain understandings, guidelines and agreements between the broker and the salespersons with respect to the perimeters of the unlicensed assistant working for the salesperson with the broker having some control over that relationship because of the broker’s supervisory responsibilities under MN Statute Chapter
82.
