The eagerly anticipated decision in Monell v. Boston Pads LLC came down this morning, affirming the lower court’s decision and likely sending the conflict back to the Legislature to resolve.

At the heart of the case is how real estate salespeople should be classified under state law – as independent contractors under the independent contractor statute, or as employees under the real estate licensing statute. As employees they are entitled to far more benefits and protections; as contractors they are not.

In this morning’s decision from the Supreme Judicial Court, the court held that real estate sales agents do not meet the second and third requirements of the independent contractor statute, but also that the more specific licensing statute governs the broader independent contractor statute.

“It’s a very narrow ruling,” said Edward Hershfeld, partner at Brown Rudnick. “The court held to the legal principle that specific statutes govern broader statutes, and that the real estate licensing statute applies here. It’s a big win for the real estate industry – for the brokerages – but it’s temporary. This is not the end of the discussion.”

For now the industry is happy with the court’s ruling.

“We’re pleased with the outcome,” said Gregory Vasil, CEO of the Greater Boston Real Estate Board. “It preserves the right of choice for our members. It doesn’t change the industry, it doesn’t change the status quo. It’s pretty clear you can have both independent contractors and employees.”

Corrine Fitzgerald, 2015 president of the Massachusetts Association of Realtors and broker-owner of Fitzgerald Real Estate in Greenfield, agreed, calling it a “good decision.”

“It’s great for brokerages to be able to continue doing what they have always done,” she said. “They will continue to be able to have a choice, and we will be able to continue to uphold the way we’ve done business for the last 100 years. It’s a win for the industry; that ability to choose is critical to the industry and to our business model. It’s a win for consumers as well.”

Still at issue is the specific wording of the real estate licensing statute, which indicates that real estate salespeople can be either independent contractors or employees – a salesperson must be affiliated with a brokerage, but “may be affiliated with a broker either as an employee or as an independent contractor.”

“The only way to settle this now is to go back to the Legislature to clarify the situation,” said Neil Markson, managing partner at Bernkopf Goodman. It’s not clear how the brokerages will prove that a contractor relationship has been established – “under the current status, I don’t know how they prove they are independent contractors.”

The decision leaves open the option to explore the classifications of real estate salespeople within the court system, or to have the Legislature address it – as it did in 2008, though the bill was ultimately vetoed by then-Gov. Deval Patrick.

“In light of the potential impact of that issue on the real estate industry as a whole and its significant ramifications for real estate salespersons’ access to the rights and benefits of employment, we think it prudent to leave that issue’s resolution to another day, when it has been fully briefed and argued,” the decision reads. “Should the Legislature be so inclined, it may wish to clarify how a real estate salesperson may gain employee status under the real estate licensing statute.”

Vasil said he’s not too worried about the Legislature picking up the debate in the near future – “while there is always that possibility, I think they really have their hands full with more pressing issues at the moment,” he said.

Going forward, Hershfeld warns, brokerages will want to be even more careful about how they classify employees.

“Brokerages will need to redouble their efforts to keep records indicating that [salespeople] are independent contractors, and not employees,” he said.

Monell Decision Limited In Scope

by Cassidy Norton time to read: 3 min
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