DECISIONS OF NOTE

How 'Real' Is Your Independent Contractor Status?

ISSUE:Can salespeople be considered "employees" even when they have a contract classifying them as independent contractors for tax purposes?

PLAINTIFF:Lynn A. Drake, a Georgia homebuyer.

DEFENDANT:Mark Six Realty Associates Inc., formerly known as Northside Realty Inc. of Georgia.

THE COMPLAINT:The homebuyer charged fraud, violation of the Fair Business Practices Act, breach of contract, negligence, and breach of warranty.

BACKGROUND:Drake purchased a home in a subdivision marketed by two real estate salespeople, whom Drake contended were employees of Mark Six (Northside). Drake alleged that the salespeople, the real estate company, and the builder sold the home to her with knowledge of substantial construction defects and concealed that knowledge from her.

LOWER-COURT VERDICT: A jury returned a verdict in favor of the homebuyer against all defendants except one of the salespeople.

THE APPEAL: The real estate company appealed, saying it shouldn't be held liable, since the salesperson was an independent contractor.

FACTS CONSIDERED:The sales associate was assigned to work in a new subdivision. It was "her sole and exclusive employment during certain specified business hours or 'staff duty schedule.' She was required to be 'on duty' during these hours by 'my manager and my boss.'" There were other restrictions and limitations, such as being subject to a quarterly performance review by a sales manager.

DECISION:The sales associate was an employee.

COURT'S REASONING:Despite the sales associate's contract, which classified her as an independent contractor, the court looked at the "reality" of the relationship between the broker and the sales associate.

The court said, "While the existence of such a contract creates a presumption that the relationship between the [broker] and salesperson is that of independent contractor, such a presumption may be rebutted by a showing that the [broker] in fact assumed control over the time, manner, and method of the salesperson's work performance."

IMPLICATIONS OF DECISION:Even if a broker and a salesperson have an agreement designed to establish independent contractor status for tax purposes, the broker still needs to observe the requirements to maintain the common-law independent contractor status for salespeople.

If the broker fails to follow these common-law requirements, a court may conclude that the salesperson is an "employee" for some purposes, such as legal liability, and an independent contractor for other purposes.

CITATION: Mark Six Realty Associates Inc. v. Drake, 219 Ga App 57, 463 SE2d 917.

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