Written By Michelle Douglass, Esq.

In a recent decision, Kennedy v. Weichert Co., No. A-0518-19 (App. Div. Feb. 9, 2023), the Court addressed whether a real estate salesperson, James Kennedy II, classified as an independent contractor through an agreement with his broker, Weichert Co., is excluded from protections under the Wage Payment Law (WPL), which covers employees but not independent contractors. Kennedy had filed a class action suit claiming misclassification and unlawful deductions from commissions.

Initially, the trial court and the Appellate Division considered Kennedy’s classification under the legal “ABC” test for employment status. However, amendments to the New Jersey Real Estate License Act (Brokers Act) complicated the issue. These amendments, effective from 2018 and further modified in 2022, clarified that real estate brokers and salespersons can enter into independent contractor agreements.

On appeal, the Court determined that the specific agreement between Kennedy and Weichert, identifying Kennedy as an independent contractor, is enforceable under the Brokers Act.

The amendments to the New Jersey Real Estate License Act (Brokers Act) were pivotal in the Court’s decision regarding Kennedy’s classification. Here’s how they influenced the ruling:

  • Clarification of Independent Contractor Status: The 2018 amendments explicitly allowed real estate brokers and salespersons to enter into independent contractor relationships. This change was crucial because it provided a legal foundation for such agreements within the real estate industry, distinguishing them from traditional employee relationships covered by the Wage Payment Law (WPL).
  • Retroactive Application: The 2022 amendments further specified that the 2018 changes apply retroactively. This meant that even for the period before the 2018 amendments, the agreements between brokers and salespersons to classify the latter as independent contractors were valid and enforceable.
  • Superseding Other Laws: The language in the amendments, particularly the “notwithstanding” clause, indicated that these agreements take precedence over any conflicting laws, rules, or regulations. This explicitly included the WPL, which otherwise would apply the “ABC” test to determine employment status.

Because of these amendments, the Court concluded that the independent contractor agreement between Kennedy and Weichert was dispositive. Thus, the legal “ABC” test, which is generally used to determine whether someone is an employee or an independent contractor under the WPL, was deemed inapplicable in this context. The Court enforced the terms of the written agreement, categorizing Kennedy as an independent contractor and excluding him from WPL protections. The Court emphasized that this agreement prevails over other legal standards, including the WPL. Consequently, the Court ruled that Kennedy, as an independent contractor by written agreement, is not subject to the WPL and reversed the lower court’s decision, mandating the dismissal of Kennedy’s complaint.

The takeaway from this decision is that under the New Jersey Real Estate License Act, as amended, real estate brokers and salespersons can establish independent contractor relationships through written agreements, which take precedence over other legal standards such as the Wage Payment Law (WPL). This means that if a real estate salesperson has agreed in writing to be classified as an independent contractor, this classification is legally enforceable, and the salesperson is not subject to the protections or employee classification standards of the WPL. The Court’s ruling underscores the importance of the specific terms of the agreement between brokers and salespersons in determining employment status within the real estate industry.

Learn more about Michelle Douglass here.