Amended in Assembly April 23, 2014

Amended in Assembly April 10, 2014

California Legislature—2013–14 Regular Session

Assembly Bill No. 2169

Introduced by Assembly Member Cooley

(Principal coauthor: Assembly Member Bonilla)

February 20, 2014

An act to amend Section 10032 of, begin delete and end delete to add begin delete Section end delete begin insert Sections end insert 10032.1 begin insert and 10032.2 end insert to, the Business and Professions Code, begin insert and to repeal Section 2 of Chapter 679 of the Statutes of 1991, end insert relating to real estate.

LEGISLATIVE COUNSEL’S DIGEST

AB 2169, as amended, Cooley. Business and professions.

Existing law, the Real Estate Law, governs the licensure and regulation of real estate salespersons and real estate brokers. Existing law requires all obligations under the Real Estate Law, all regulations issued by the Real Estate Commissioner relating to real estate salespersons, and all other obligations of brokers and real estate salespersons to members of the public to apply regardless of whether the real estate salespersons and the broker to whom he or she is licensed have characterized their relationship as one of “independent contractor” or of “employer and employee.”

Existing law authorizes a real estate broker and a real estate salesperson licensed under that broker to contract between themselves as independent contractors or as an employer and employee, for the purposes of their legal relationship with, and obligations to, each other. Under existing law, the characterization of a relationship as either “employer and employee” or “independent contractor” for purposes, including, but not limited to, withholding taxes on wages and unemployment compensation is governed by certain specified provisions of law. Existing uncodified law prohibits the above provisions from being interpreted or applied to affect existing obligations of a real estate broker regarding liability or workers compensation insurance or from altering existing case law.

begin delete

This bill would clarify that the characterization of a relationship of a real estate broker and a real estate salesperson licensed under that broker as either “employer and employee” or “independent contractor” is conclusive for statutory, regulatory, or common law purposes, if certain statutory requirements are satisfied. The bill would state findings and declarations and the intent of the Legislature in this regard.

end delete begin insert

This bill would recast and codify the provision relating to the interpretation and application of law on existing obligations of a real estate broker, as described above. The bill would also state findings and declarations and the intent of the Legislature to reiterate the application of existing law regarding the validity and enforceability of the election made by the parties to a real estate retention agreement to characterize their relationship as one of “independent contractor” or “employer and employee.”

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Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 10032 of the Business and Professions
Code is amended to read:

10032.  

(a) All obligations created under Section 10000, and
following, all regulations issued by the commissioner relating to
real estate begin insert brokers and real estate end insert salespersons, and all other
obligations of brokers and real estate salespersons to members of
the public shall apply regardless of whether the real estate
salesperson and the broker to whom he or she is licensed have
characterized their relationship as one of “independent contractor”
or of “employer and employee.”

(b) A real estate broker and a real estate salesperson licensed
under that broker may contract between themselves as independent
contractors or as employer and begin delete employee. The characterization end delete
begin insert employee, for purposes of their legal relationship with and
obligations to each other. Characterization end insert of a relationship as
either “employer and employee” or “independent contractor” begin delete shall
be conclusive for statutory, regulatory, and common law purposes
if the requirements of end delete begin insert for statutory purposes, including, but not
limited to, withholding taxes on wages and for purposes of
unemployment compensation, shall be governed by end insert Section 650
and Sections 13000 to 13054, inclusive, of the Unemployment
Insurance begin delete Code are met. end delete begin insert Code. end insert For purposes of begin delete workers end delete begin insert workers end insert begin insert ’ end insert
compensation the characterization of the relationship shall be
governed by Section 3200, and following, of the Labor Code.

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Section 10032.1 is added to the end insert begin insert Business and
Professions Code end insert begin insert , end insert immediately following Section 10032 begin insert , to read: end insert

begin insert

begin insert 10032.1. end insert   

Section 10032 shall not be interpreted or applied to
affect the obligation or ability, if any, of a real estate broker to
maintain workers’ compensation insurance, or the holding in
Gipson v. Davis Realty Co. (1963) 215 Cal.App.2d 190, that a real
estate broker may be vicariously liable under the doctrine of
respondeat superior for tortious acts of a salesperson licensed
under that broker; and further, that real estate salespersons cannot
be classified as independent contractors for purposes of liability
to third parties, and that any provision in a contract that purports
to change that relationship from that of an agent to independent
contractor is invalid as being contrary to law for purposes of tort
liability to third parties.

end insert

begin delete SEC. 2. end delete
begin insert SEC. 3. end insert   

Section begin delete 10032.1 end delete begin insert 10032.2 end insert is added to the Business and
Professions Code, immediately following Section begin delete 10032 end delete begin insert 10032.1 end insert ,
to read:

begin delete 10032.1. end delete
begin insert 10032.2. end insert   

(a) It is the intent of the Legislature begin delete in enacting the
amendments to Section 10032 end delete begin insert that the codification of Section 2
of Chapter 679 of the Statutes of 1991 end insert made by Assembly Bill
2169 of the 2013-14 Regular Session begin delete to restate existing law for
purposes of clarification and end delete begin insert is end insert to reiterate the application of
existing law regarding the validity and enforceability of the election
made by the parties to a real estate retention agreement to
characterize their relationship as one of “independent contractor”
or “employer and employee.”

(b) The Legislature finds and declares all of the following:

(1) The real estate marketplace is an important part of
California’s economy. The continued smooth functioning of the
existing marketplace model of supervising real estate brokers and
real estate salespersons is important in order to avoid a disruption
of the market, which could result in a significant negative effect
on California’s economic recovery.

(2) The retention relationship of real estate brokers and real
estate salespersons is unique and operates under a special statutory
scheme, the Real Estate Law, and the implementing regulations
of the Real Estate Commissioner, notwithstanding the general
statutory provisions that govern employment relationships.

(3) The contractual relationship of nearly 300,000 real estate
salespersons and their ongoing retention is put at risk if they and
their affiliated offices cannot be confident in the validity and
enforceability of their choice to characterize their relationship as
one of “independent contractor” or of “employer and employee”
under their retention agreement.

(4) The overwhelming majority of real estate salespersons and
real estate brokers have relied in good faith upon the ability to
make the choice to characterize their relationship as one of
“independent contractor” for all statutory purposes, with the
understanding that their choice is conclusive as to the
characterization of their legal relationship, as allowed pursuant to
Section 10032, by satisfying the three-part criteria set forth in
Section 650 and Sections 13000 to 13054, inclusive, of the
Unemployment Insurance Code, and related portions of the Real
Estate Law, which begin delete governs end delete begin insert govern end insert the applicability of certain
Labor Code provisions.

(5) The begin delete amendments made to Section 10032 by end delete begin insert codification of
Section 2 of Chapter 679 of the Statutes of 1991 made by end insert Assembly
Bill 2169 of the 2013-14 Regular Session begin delete do end delete begin insert does end insert not change the
rights and obligations of either real estate brokers or real estate
salespersons under Section 650 and Sections 13000 to 13054,
inclusive, of the Unemployment Insurance Code, or the
characterization of their respective relationship for purposes of
workers’ compensation under Section 3200, and following, of the
Labor Code.

begin insert

begin insert SEC. 4. end insert   

end insert

begin insert Section 2 of Chapter 679 of the Statutes of 1991 is
repealed. end insert

begin delete

SEC. 2.  

This act shall not be interpreted or applied to affect the
obligation or ability, if any, of a broker to maintain workers
compensation insurance, or the holding in Gibson v. Davis Realty
Co. (1964) 215 Cal. App. 2d 190, that a real estate broker may be
vicariously liable under the doctrine of respondeat superior for
tortious acts of a salesperson licensed under the broker; and further,
that real estate salespersons cannot be classified as independent
contractors for purposes of liability to third parties and that any
provision in a contract which purports to change that relationship
from that of an agent to independent contractor is invalid as being
contrary to law for purposes of tort liability to third parties.

end delete