Bill Aims To Clarify Independent Contractor Status

The legislation calls for a universal standard for qualified real estate professionals and direct sellers to be applied consistently under the Fair Labor Standards Act.

Real estate agents are deemed independent contractors under the Internal Revenue Code for federal tax purposes, but that status hasn’t been consistently applied to all statutes, specifically within the Fair Labor Standards Act. A new bill on Capitol Hill aims to change that.

The Direct Seller and Real Estate Agent Harmonization Act (H.R. 5419), which was introduced in the House on Tuesday, seeks to amend the Fair Labor Standards Act of 1938 to clarify the definition of “employee” by incorporating the Internal Revenue Code recognition of direct sellers and qualified real estate agents as “independent contractors.” Proponents of the bill, which is sponsored by Rep. Tim Walberg (R-Mich.), say it offers a clearer and more universal statutory standard.

Read more: FAQs on independent contractor status in real estate

“While the ability to work as an independent contractor is recognized and protected under the IRC and many state laws, new federal rules and state legislation expanding the definition of ‘employee’ continue to threaten workers’ ability to be classified as independent contractors, including for many real estate professionals and direct sellers,” the National Association of REALTORS® and the Direct Selling Association said in a joint statement supporting the bill. The associations are working together to clarify the misinformation and inconsistencies around independent contractor status for the real estate and direct selling industries.

About 87% of the nation’s 1.5 million REALTORS®, who are NAR members, and nearly 7.3 million direct sellers are classified as independent contractors. Direct sellers contributed $42.7 billion to the U.S. economy in 2021, and the real estate industry comprises $3.9 trillion—or 17% of the economy.

“This classification is essential to the real estate and direct selling industries,” NAR and the DSA said in their joint statement. “A clear statutory standard is critical to protecting the livelihoods of direct sellers and real estate agents supporting consumers across America.”

Source: REALTOR® Magazine