- National Association of Realtors

NAR Legal Update
Broker Summit
August 6, 2014
Ralph Holmen
Associate General Counsel
[email protected]
312 329 8375
Independent Contractor Status of
Real Estate Sales Agents
• Historically most real estate agents treated as
independent contractors, rather than employees.
• Various common law “tests” or criteria for
determining I/C status.
• I.R.C. §3508 provides a discrete three factor test
for federal tax purposes:
– Written agreement
– License
– Most compensation from sales/output
Independent Contractor Status of
Real Estate Sales Agents
Monell v. Boston Pads, LLC, (unpublished), No. 113756 (Mass. Super. Ct. July 15, 2013).
Barasani v. Coldwell Banker, No. BC495767 (Cal.
Sup. Ct.), complaint filed Nov. 15, 2012.
Cruz v. Redfin, No. RG13707955 (Cal. Supt. Ct.),
complaint filed Dec. 23, 2013.
Independent Contractor Status of
Sales Agents
• Trend or aberration?
• Many states currently expressly address the unique
status of real estate sales agents in their statutes.
• Brokers should be sure to use care in referring to
their sales agents as independent contractors.
• NAR develop educational resources to assist
• General rule: Use of drones (“UAS” ) by hobbyists or for
research or public safety is permitted. Any other commercial
use requires FAA approval on case-by-case basis.
• FAA Model Aircraft “guidelines”: Below 400 feet; 3 miles
from an airport; away from populated areas; line of sight.
• FAA v. Pirker: NTSB Administrative Law Judge held March
6, 2014 that Federal aviation regulations inapplicable to
drones that are “model aircraft,” even for “business
• June 25, 2014: FAA seeks comment on its Interpretation of
the Section 336 Special Rule for Model Aircraft included in
the 2012 Modernization and Reform Act.
Data Security and Privacy
• « Not just an issue for “big companies.”
• « Every brokerage office maintains personally
identifiable information (PII).
• « Extensive state regulation of collection and retention of PII
• « Most states address collection, disposal, and breach
notification of PII.
• « Some real estate license regulations address licensees
securely maintaining and destroying records, including
transaction docs.
• Tennessee regulation requires principal brokers to develop and utilize
a retention schedule.
• South Dakota applies a policy describing 11 requirements for
safeguarding electronically stored records.
• «No Federal data security, privacy, and breach notification
laws yet, but being considered.
What is personally identifiable information?
• Defined by state law, but generally means:
« First name/initial and last name in
combination with any of the following:
« Social Security Number
« Driver’s license or state-issued ID number
« Financial account number
« Medical/health information
• « Social Security Numbers
• Sales contracts
•Credit/background checks on renters
•W9s (collected by listing brokers from
individuals receiving more than $600
cooperating commission)
• « Driver’s license or state-issued ID numbers
• Clients’ driver’s licenses (collected as safety precaution)
• Rental applications; credit/background checks
• « Financial account number
• Personal checks given as earnest money
• Mortgage account number on HUD-1
• Credit/background checks on renters
•Earnest money checks
• « Other
• Employee/agent records maintained in HR
files contain many PII elements
• Copies of loan documents or credit card
payments related to transaction even without
asking clients to provide such information
• Where is PII stored?
• « Broker email systems and networks
• « Scanners, copiers, and fax machines
• « Agents’ personal email
• « Agents’ mobile text
• « Agents’ personal home computer/laptop
• « Cloud storage facilities
• « Physical file cabinets
• What’s the cost of a breach?
• « Operational expenses (i.e., damage to systems; time spent
investigating breach and working with law enforcement)
• « Cost of breach notification (avg. $194 per record)
• « Civil penalties
• « Annual audit/reporting requirements
• « Negative public perception
• « Potential future liability (i.e., ID theft)
Five Step Program
• « Take Stock
• « Scale Down
• « Lock it Down
• « Pitch It
• « Plan Ahead
• NAR Resources
• « NAR Data Security and Privacy Toolkit
• http://www.realtor.org/law-and-ethics/nars-data-securityand-privacy-toolkit
• « Five Steps towards Achieving Data Security
• http://www.realtor.org/articles/five-steps-towardsachieving-data-security
• « Data Security and Privacy page on REALTOR®.org
• http://www.realtor.org/topics/data-privacy-and-security
• « Data Security Video
• http://www.realtor.org/videos/data-privacy-be-ahead-ofthe-law
Risk Management
• Fair Housing
– Use/display of databases containing demographic
– Compliance with Affiliated Business Arrangement
disclosure requirements.
• Antitrust
– Competing with new or innovative business models.
Short Sale Auction Programs
• Auction.com/Nationstar
• OCWEN/Hubzu

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