Source: http://journal.firsttuesday.us/the-broker-associates-written-right-to-compensation/58001/
Timestamp: 2018-04-21 09:25:17
Document Index: 573567421

Matched Legal Cases: ['§10131', '§2079', '§10177', '§10137', '§2079', '§2']

The broker-associate’s written right to compensation | first tuesday Journal
Posted by Connor P. Wallmark | Apr 17, 2017 | Feature Articles, Latest Articles | 0
Raising the profile of broker-associates
Broker-associates are soon to become a more visible participant in California’s real estate market.
The California Bureau of Real Estate (CalBRE) currently does not publish the employing broker information for broker-associates on their online license lookup. However, beginning January 1, 2018, a broker-associate’s CalBRE public record will identify their employing broker(s).
Further, employing brokers will need to notify the Real Estate Commissioner in writing when they commence or terminate employment of a broker-associate, as they currently are required to do for salespersons.
This will increase public accountability for broker-associates, calling for the broker-associate’s relationship to their employing broker to be listed on their public license lookup.
Until the new law becomes effective, it is up to employing brokers to maintain professional accountability for the broker-associates in their employment.
Broker-associates: agent of the broker, forever and always
Licensed CalBRE real estate brokers may work independently for themselves. CalBRE brokers are authorized to deal directly with members of the public to offer, contract for and render brokerage services for compensation, called licensed activities. [Calif. Business and Professions Code §10131]
Alternatively, a broker may choose to work under another broker, functioning as a broker-associate. Broker-associates are considered legally equal to sales agents when they work under another broker’s employment. Thus, they are subject to the same duties and limitations. For example, broker-associates are still considered “agents of the agent” acting on behalf of their employing broker. Both broker-associates and sales agents are considered associate licensees to the employing broker. [Calif. Civil Code §2079.13]
Employing brokers are mandated to consistently supervise all licensees in their practice to ensure they are upholding correct business practices — and that includes broker-associates. [Bus & P C §10177(h)]
Further, a broker-associate may only receive compensation for their real estate related activities from their employing broker. A broker-associate may not receive compensation directly from anyone else (e.g., the seller or buyer, another licensee, mortgage lender, landlord or tenant). [Bus & P C §10137]
Thus, brokers are legally the agents of the members of the public who employ them, while a broker-associate (and of course a sales agent) is the agent of the agent — their broker. [CC §2079.13(b)]
The employment agreement triggers the right to a fee, not the listing
Most broker-associates receive compensation from their brokers based on a negotiated percentage of contingency fees received by the broker for completed sales, leases or mortgages solicited, negotiated or processed by their agents and broker-associates.
Thus, a broker-associate’s right to a fee arises under the written employment agreement with their broker — not a listing agreement with the client which is entered into with the broker. Through an employment agreement between the broker and broker-associate, the broker-associate is entitled to a share of the fees received by the broker on sales, leases or mortgage originations in which the broker-associate participated.
A real estate broker is required to have a written agreement with each of the broker-associates (and sales agents) acting on their behalf.
To document the material aspects of the employment relationship between the broker and a broker-associate, Realty Publications, Inc. (RPI) publishes an Independent Contractor Employment Agreement — For Sales Agents and Brokers Associates. [See RPI Form 506]
As the roles and duties of the broker-associate and sales agent are identical, this written employment form is equally applicable to both types of licensees. There is no need for a separate broker-associate employment agreement that is unique to broker-associates.
The IC agreement is used by an employing broker to establish the duties of the broker and broker-associate, set the earned fees and establish how the fees will be allocated and shared. The IC agreement, in contrast with an employee agreement form, is used to avoid withholding and employer contributions by the brokers. [See RPI Form 506 §2.13]
Alternatively, the broker may choose other pay and tax withholding arrangements documented by an employee agreement form with the broker-associate. [See RPI Form 505]
Regardless of the written employment agreement used and signed by the agent, the broker and broker-associate are CalBRE compliant.
Despite the labels given to these agent employment forms, a broker-associate is always an employee of the broker under California’s labor law.
Thus, the employing broker is liable for any wrongful conduct committed by the broker-associate. Even if an IC agreement is used to document the employment, a broker-associate may not permissibly act independently of their employing broker. The employing broker still owes a duty of supervision to the broker-associate as well as a mandated worker’s compensation policy. [See RPI Form 506]
agent compensation. [SeeRPI Forms 505 and 506]
Further, both types of employment agreements require all documents and funds received on listings and sales to be entered into and taken in the name of the employing broker — not the broker-associate.
Additionally, the broker-associate’s employment agreement with their employing broker most often indicates the broker-associate agrees to provide real estate services to clients only on behalf of the employing broker. Thus, the scope of the broker-associate’s employment is limited in the same manner as that of a sales agent. [See RPI Form 505 and 506]
Despite the obvious practicality of requiring a broker-associate to work only for a single broker, some employing brokers may not require broker-associates to agree to exclusive employment. This obligation or lack thereof is spelled out in the employment agreement provided by the employing broker.
As mentioned above, standard employment agreements usually indicate the broker-associate is not to provide real estate services on behalf of anyone but the employing broker. When employment agreements dictate the broker-associate’s rights, then broker-associates may not work for multiple brokers, regardless of their broker’s license. [See RPI Form 505 and 506]
Neither California real estate law nor the CalBRE has limited broker-associates’ ability to work for multiple employing brokers. Instead, the employing broker’s contract with the broker-associate is the only determinant of a broker-associate’s employment limitations.
Editor’s note —Broker-associates with mortgage loan originator (MLO) endorsements need to ensure their employing brokers also have MLO endorsements.
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