Form-of-the-Week:

Agent and Broker-Associate Employment Agreements — Forms 505 and 506

Public release of a broker’s licensed employees

As common knowledge within the profession, a real estate broker hiring other licensees to act on their behalf enter into written agreements with each of the associate-licensees they employ to act as their agents. The employment agreement covers material aspects of the employment relationship between the broker and their sales agent or broker-associate. The employment agreement sets the parameters for the conduct of both — and their fee sharing arrangements.

Any individual, sales agent or broker, licensed by the California Bureau of Real Estate (CalBRE) licensee and acting on behalf of a broker, is both an employee and an agent of the employing broker. Thus, any licensee hired by a broker interacts with members of the public under the mandate they are to be continuously supervised by the broker, whether they are a salesperson or broker-associate. Of importance is the concept they represent the broker when acting as an agent of the broker, never independent of their employing broker (except for broker-associates if permitted by their employing broker). [Calif. Civil Code §2079.13(b)]

All CalBRE licensed brokers fall into categories distinctly different from licensed salespersons. Brokers, unless they hold themselves out as a broker-associate employed by a broker when negotiating a transaction on behalf of a client, are authorized to independently deal directly with members of the public. Only they as brokers are authorized to offer, contract for and render brokerage services on the client’s behalf for compensation, called licensed activities. Sales agents never are, nor are brokers when holding themselves out as a broker-associate. [Calif. Business and Professions Code §10131]

A real estate agent and a broker-associate when dealing with members of the public as a licensee are required to present themselves as an agent acting on behalf of their employing broker. Agents of an employing broker may not contract in their own name or on behalf of anyone — including other brokers with the sole exception of those broker-associates whose employment agreement so permits — other than in the name of their employing broker.

Further, a sales agent may not seek or be employed by a person who is a member of the public — they are not a broker. This is the reason a sales agent’s or broker-associate’s license is handed to the employing broker, who retains possession of the license until the licensee leaves their employ (unless the broker-associate has been authorized to work with other brokers under their employment agreement). [Bus & P C §10160]

A sales agent may perform brokerage services only when they are acting as a representative of the broker who employs them — evidenced by a writing. Only a licensed broker is authorized to contract for and render services on behalf of members of the public, be they clients or customers. [Grand v. Griesinger (1958) 160 CA2d 397]

Further, a sales agent and a broker when acting as a broker-associate may only receive compensation for their real estate-related activities from their employing broker. A sales agent may not receive compensation directly from anyone else (e.g., an owner, buyer, another licensee, mortgage lender or tenant), much less illegal kickbacks. [Bus & P C §10137]

Thus, brokers are legally the agents of the members of the public who employ them, while a broker’s sales agents and broker-associates are the agents of the agent — the individuals who render services for the broker’s clients by acting on behalf of their broker. [CC §2079.13(b)]

As a result, employing brokers are responsible for all the activities their sales agents and broker-associates carry out within the course and scope of their employment with the broker. [Gipson v. Davis Realty Company (1963) 215 CA2d 190]

The agent’s and broker-associate’s right to compensation
New broker-associate reporting hits January 1, 2018

505

506