In a recent decision, the New Jersey Appellate Division held in Kennedy v. Weichert Co., No. A-0518-19, __N.J.__ (App. Div. Jan. 30, 2023) (slip. op.), that the “ABC Test” (described here) does not apply when determining whether a real estate salesperson is an independent contractor or employee under New Jersey’s Wage Payment Law (“WPL”). This decision overrules the courts prior holding in Kennedy v. Weichert Co., No. A-0518-19, 2021 N.J. Super. Unpub. LEXIS 1354 (App. Div. July 2, 2021), which held real estate salespersons were subject to the ABC Test with respect to agreements that were executed prior to the 2018 Amendments to the Real Estate Brokers and Salesmen Act (“Brokers Act”), N.J.S.A.  45:15-1, et seq. These amendments allowed for real estate salespersons to operate as independent contractors. Weichert appealed the 2021 decision to the New Jersey Supreme Court arguing that real estate salespersons should not be subject to the ABC Test at all, including for the time period prior to the Brokers Act Amendments. The Supreme Court remanded the case to the Appellate Division following the passage of bill A-6206 on January 18, 2022. Specifically, this new legislation codifies the right of real estate salespersons to work as employees or independent contractors. The law also enforces current and previous written agreements addressing the working relationship between real estate brokers and salespersons.

In finding that the ABC Test does not apply to fully commissioned real estate salespersons who assert claims under the WPL, the court emphasized the language in Section 3.2(b) of the Brokers Act, which provides that "[n]otwithstanding any provision of [the Brokers Act] or any other law, rule or regulation to the contrary, a business affiliation between a broker and a . . . salesperson may be" either "an employment relationship or the provision of services by an independent contractor." As such, the court found that the application of the ABC Test to real estate salespersons would go against the plain language and legislative intent of the Brokers Act. The court also found that if the ABC Test were to apply, a real estate salesperson would never be considered an independent contractor. This is because a real estate salesperson would always be considered an employee based on how a real estate salesperson is defined under the Brokers Act.

Unfortunately, the court did not define or establish another test that would be used to distinguish when a real estate salesperson is considered an employee versus an independent contractor. Instead, the court remanded the case to the trial court for the parties to develop a more complete record of the facts and give the parties the opportunity to address in their briefs “how the court should determine the nature of their relationship.” Further, the court made clear that an agreement that identifies a real estate salesperson as an independent contractor or employee is not dispositive in determining the salesperson’s worker status -- as the court still acknowledges that a worker’s employment classification involves a highly fact specific analysis.

Bottom Line

Although the ABC Test does not apply to fully commissioned real estate salespersons under the WPL, consistent with this decision, real estate brokers should still be mindful if it asserts a higher level of control and supervision than is required by the Brokers Act. The more supervision and control a broker asserts over its salespersons, the more likely a court will find that an employment relationship exists. As such, it is expected that the trial court will eventually develop a test to determine the worker status of real estate salespersons related to this action.

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