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What does California Assembly Bill 5 (AB5) mean for the Real Estate Industry?


An oft discussed topic for old fogey real estate professionals that the young ‘uns should pay attention to is the special status that real estate agents have as independent contractors. In this country, Real Estate is a protected industry, mainly because it is seen politically as the main step in the ladder to the middle class. This has affected mortgage policy and real estate agents, they have been purposely given generous terms.

The point of bringing these points up is that real estate does not exist in a vacuum, and it cannot exist as it does today without massive government backing, through regulation, taxation and legislation. The recent signing of Assembly Bill 5 (AB5) is a step to close this. Though the purpose of the bill is to target the ‘gig economy’ of Uber, Lyft, Doordash, Postmates and hundreds of others, there was a special exception for certain types of workers, including real estate.

This policy codifies an earlier legal decision from the California Supreme Court (Shorthand Dynamex) that redefines a specific set of criteria for someone to be considered an independent contractor versus an employee, there was a radically re-written set of rules for a company to follow.  Essentially, the bill would require companies to use a legal standard called “the ABC test” when determining employment status:
A): The worker is “free from the control and direction” of the company that hired them while they perform their work.
(B): The worker is performing work that falls “outside the hiring entity’s usual course or type of business.”
(C): The worker has their own independent business or trade beyond the job for which they were hired.

So, who benefits from this? As I learned from my mother, “when you do not understand someone’s motivation, follow the money”. According to the Los Angeles Times, the state “lost” about $7 Billion in payroll taxes in 2017. Is it more likely the state is trying to “help workers” or to fill the general fund? Another cynical outlook is that the state wants to put this into State statute so that the state of California can sue an employer directly, rather than relying on workers themselves to start litigation. It is another continuation of the state believing they know better for adult citizens than they do for themselves.

Real Estate agents are exempt for now, as well as a few other industries, such as law offices, doctor’s offices and accountants. The 40M witnesses in the great state of California are watching, as is the country, on has far these changes will be pushed.

Orange, CA-TRREG DRE#01843673-RP100 DRE#02059058-P:714-831-1800-E:info@theresultsrealestategroup.com-W:www.theresultsrealestategroup.com-Facebook - Twitter - Instagram - LinkedIn

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