Real Estate Agents Could Get Legal Clarity That Sets Them Up For New Benefits

A Congressional effort could give real estate agents more clarity about their employment protections, encouraging more full-time agents to stay in the business.

H.R. 3495, the Direct Seller and Real Estate Agent Harmonization Act, would clarify real estate agents' status as independent contractors. It specifically inserts an exclusion for them into the Fair Labor Standards Act. That's an effort to ensure that those agents have legal clarity that reflects the reality of their work. Rep. Kevin Kiley (R-CA) introduced the bill, and it has 31 cosponsors of both parties.

“For decades, the tax code has recognized direct sellers and real estate agents as independent contractors,” Kiley said in a statement. “These workers deserve our support to thrive, not more bureaucratic uncertainty. Clarifying our labor laws will support hard work and innovation while providing workers with the flexibility they so clearly need.”

The cost to the government would be fairly small, according to the Congressional Budget Office. The U.S. Department of Labor typically collects less than $20 million in penalties for FLSA violations. But the bill would impose a private-sector mandate that workers won't have legal grounds to seek compensation for FLSA violations, too.

The National Association of Realtors has cheered the proposal. It's worried about a proposed rule change to how the government treats independent contractors, aimed at offering more workers labor protections. But that change could cause more agents to be classified as employees.

Beneficial status

About 87% of NAR members are classified as independent contractors. The proposed legislation reduces confusion, NAR Chief Advocacy Officer Shannon McGahn tells Realtor.com®. It shouldn't change how the public interacts with real estate professionals.

"That clarity is important because the independent contractor model gives real estate professionals the flexibility and autonomy to run their businesses and serve their clients," McGahn said in an email. "The goal is to provide a clear and consistent federal standard and reduce uncertainty around worker classification."

Congress has been eager to update the Fair Labor Standards Act, arguing the 1938 bill doesn't account for the large number of people who work for themselves in the modern economy. Independent contractors need clarity so they have more options when choosing whether to go into business for themselves full time.

At the same time, NAR has been arguing for other legislative moves that could benefit independent contractors. First and foremost is a proposal from the Labor Department that could allow contractors to obtain helath plans from a membership-based association.

That, McGahn says, would give real estate agents the option to obtain health plans through their local associations, and would give them the same health coverages choices as full-time and unionized employees.

This too shouldn't impact the home buying experience, McGahn said, but it offers "a practical, durable option" for insurance that contractors rely on long-term.

"Today, many self-employed individuals must navigate a complex health insurance marketplace, often relying on brokers to sort through insurance and non-insurance coverage options," McGahn says. "Access to coverage through a trusted trade association could make that process simpler and more transparent by giving members an option for affordable, high-quality coverage."