May an agent employed as an independent contractor (IC), when also employed as a sales manager for a broker, avoid the exclusion of their IC agent activities from Labor Code protections?

Whitlach v. Premier Valley, Inc.

Facts: A real estate agent employed by a broker under an independent contractor agreement (ICA), also enters into a separate employment agreement as a sales manager with the employing broker. The agent is paid a percentage fee when performing real estate services for members of the public but is paid hourly when working as the sales manager. The broker fully pays and reimburses the agent’s sales manager activities as required by the Labor code. The agent is paid as agreed under the ICA for sharing fees on transactions. The agent seeks to invalidate their ICA and enforce civil penalties against the broker for violations of the Labor Code which protect employees other than Department of Real Estate (DRE) licensees employed under an ICA.

Claim: The agent claims they are entitled to be classified as an employee in all capacities to be timely paid minimum wages as well as receive all Labor Code protections offered to other employees since the ICA is an adhesion contract designed to deprive IC agents of protections afforded to other employees, which was cancelled when the agent became an employee under the sales manager agreement which is not an independently established trade.

Counterclaim: The broker claims the agent is an IC not entitled to Labor Code provisions for percentage fee-based employment since the sales manager employment did not cause a cancellation of the ICA and no Labor Code violations occurred when acting in the sales manager capacity.

Holding: A California appeals court holds the broker may classify the licensee as an IC regarding their agency duties and is not obligated to extend Labor Code protections offered to other employees when also employing the licensee as a sales manager since the ICA contractually classified the licensee as an IC and the sales manager agreement did not cancel the ICA by novation and did not violate the labor code. [Whitlach v. Premier Valley, Inc. (2022) 86 CA5th 673]

Whitlach v. Premier Valley, Inc.

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