Last week, the United States House of Representatives passed what is known as the PRO Law, a bill that aims to make unions in the 27 states responsible for the “right to work” and to impose Dynamex ABC test for independent entrepreneur status across the country.

Real estate agents have been warned. If the PRO Act can attract 10 U.S. Senators (and thus survive an expected filibuster), realtors who don’t self-incorporate will automatically become employees of their brokerage firm. Unlike California and AB5, there are few opportunities for NAR, or real estate agents in general, to participate in legislative deliberations and obtain an exemption.

The fight for the PRO Act is a fight to see if compromises and compromises can breed bipartisanship. Ten US Senators is the end goal. The bill has passed the House and President Biden has already pledged to sign it.

Getting those 10 senators won’t be easy, but don’t take comfort in that fact. There is at least one way forward, and if it works, independent contractor status for real estate agents will be a relic of history. This path involves what is known as Article 230 – the law that exempts internet platforms from legal liability for content posted on them by external parties.

Think about Facebook and Twitter. A major Republican goal in recent years is to revoke or revise the liability exemptions offered by Article 230. If the Democrats go, the compromise effort has a reasonable chance of success. The bill would still need to be amended to remove provisions that force unions on members reluctant to reach heaven’s provisions that Democrats are likely to drop if a compromise is possible.

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If the PRO law passes, what happens to real estate agents?

Basically, it’s Dynamex imposed nationally. No real estate company can claim that its brokers and sellers pass the ABC Independent Contractor Test. So, by definition, we all become employees. But there is an escape hatch.

Most states allow real estate agents to self-incorporate and have their real estate license held on behalf of an LLC, PLLC, PA, or S Corp. Real estate agents who make this change essentially become employees of their own entity and their brokerage firm has an independent business relationship with that company. This change will cost the realtor several hundred dollars a year and impose more paperwork, but not much will change at the end of the day.

This is not the case, however, for those who do not self-incorporate, whose employers will now be responsible for complying with labor laws and employment taxes. Commission splits will need to be renegotiated to reflect the change in who pays the employer’s share of Medicare and Social Security (currently real estate agents pay all of this through self-employment taxes. ).

This is a huge opportunity to reorganize and modernize Industry. Brokers might insist that new agents start as employees and are only willing to enter into a business-to-business independent contractor agreement with established and experienced agents. Many part-time “I only sell my friends one house a year” agents may decide to abandon the business. NAR can try to fight tooth and nail against this change (remember that NAR makes money based on the gross number of active agents; so anything that has the potential to reduce the number of agents is a threat. ), but the potential for positive change in the industry is a difficult question to question in any meaningful way.

We have to keep in mind that this is unlikely to be a fight that NAR can influence. The PRO law (with infrastructure) is one of the most promising areas for bipartisanship. Passage is a battle to get 10 US Senators. Rather, NAR must fight to maintain the support of 41. Given the importance President Biden put on the PRO law, it seems foolish to assume that the bill will be defeated.

Realtors may have been granted a stay in California against AB5. No such rescue is likely at the national level. Welcome to real estate in the Dynamex era.

This column does not necessarily reflect the opinion of the editorial staff of HousingWire and its owners.

To contact the author of this story:
Michael Lissack at [email protected]

To contact the editor responsible for this story:
Sarah Wheeler at [email protected]