NJ Supreme to Decide If Real Estate Agents Are Subject to ABC Test

The Supreme Court of New Jersey has agreed to consider Kennedy v. Weichert Co., which involves the application of the state’s ABC test for determining whether a worker is an employee or an independent contractor under the Wage Payment Law (WPL). The specific issue before the court is whether the ABC test applies to real estate agents.

Facts of the Case

James Kennedy, II, was a commissioned salesperson with Weichert Company, a licensed real estate broker. Kennedy alleges, for himself and a putative class, that Weichert violated the WPL’s limitation on wage withholdings or diversions, N.J.S.A. 34:11-4.4, by deducting marketing, insurance and other expenses from his wages. In its dismissal motion, Weichert argued that fully commissioned real estate salespersons are independent contractors, whom the WPL does not cover.

The trial court denied the motion after declaring that the “ABC test” under the Unemployment Compensation Law (UCL) determines a real estate salesperson’s status as an independent contractor under the WPL. In so doing, the trial court followed the Supreme Court’s holding in Hargrove v. Sleepy’s, LLC, 220 N.J. 289 (2015). There, responding to a certified question from the Third Circuit, the Court held “that the ‘ABC’ test . . . governs whether a plaintiff is an employee or independent contractor for purposes of resolving a wage-payment or wage-and-hour claim.

Weichert contends the New Jersey Supreme Court’s holding does not reach real estate salespersons. Weichert argues that the ABC test does not apply to real estate salespersons because the UCL expressly excludes them from coverage. Also, Weichert contends that the Real Estate Brokers and Salesmen Act (Brokers Act) recognizes real estate salespersons’ independent-contractor status, while requiring relationships inconsistent with the ABC test.

Appellate Division’s Decision

The Appellate Division affirmed the trial court’s denial of Weichert’s motion to dismiss. It held that the trial court correctly held that the ABC test is the appropriate one to determine whether Kennedy and the putative class were employees under the WPL for the period until August 9, 2018. For the period thereafter, the Appellate Division concluded that the trial court should determine the appropriate test in light of a full factual record.

In reaching its decision, the Appellate Division first addressed Weichert’s argument that the UCL, which includes the ABC test, exempts fully commissioned real estate salespersons. It concluded that the UCL’s special treatment of commissioned real estate salespersons does not render the ABC test inappropriate to determine a real estate salesperson’s independent-contractor status under the WPL.

The Appellate Division next turned to the argument that the ABC test is inconsistent with the Brokers Act’s more specific provisions on real estate salespersons’ status. It found that the Brokers Act amendments are prospective in effect and, therefore, can have only a minor impact on the dispute. As the court explained, Section 3 of the 2018 statute became effective August 10, 2018, and Kennedy seeks damages for the period between August 8, 2012 and November 6, 2018; accordingly, the Brokers Act amendments would apply only to the last three months or so of Kennedy’s relationship with defendant.

Issue Before the NJ Supreme Court

The Supreme Court of New Jersey granted certification on November 22, 2021. The justices agreed to consider the following question: “Are commissioned real estate salespersons exempt from the Wage Payment Law by operation of their exclusion from the Unemployment Compensation Law under N.J.S.A. 43:21-19(i)(7)(K), or pursuant to the Real Estate Brokers and Salesmen Act?”

Oral arguments have not yet been scheduled. Please check back for updates.

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