JAMES KENNEDY, II VS. WEICHERT CO. (L-2266-19, ESSEX COUNTY AND STATEWIDE) ( 2021 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-0518-19
JAMES KENNEDY, II, on
behalf of himself and those
similarly situated persons,
Plaintiff-Respondent,
v.
WEICHERT CO. d/b/a
WEICHERT REALTORS,
Defendant-Appellant.
_______________________
Argued March 23, 2020 – Decided July 2, 2021
Before Judges Messano, Ostrer and Susswein.
On appeal from an interlocutory order of the Superior
Court of New Jersey, Law Division, Essex County,
Docket No. L-2266-19.
John F. Birmingham (Laddey, Clark & Ryan, LLP) of
the Michigan bar, admitted pro hac vice, and Jennifer
M. Keas (Foley & Lardner, LLP) of the District of
Columbia bar, admitted pro hac vice, argued the cause
for appellant (Laddey, Clark & Ryan, LLP, Foley &
Lardner, LLP and Jennifer M. Keas, attorneys; Thomas
N. Ryan, John F. Birmingham and Jennifer M. Keas, on
the briefs).
Ravi Sattiraju argued the cause for respondent
(Sattiraju & Tharney, LLP, attorneys; Ravi Sattiraju, of
counsel and on the briefs; Anthony S. Almeida, on the
briefs).
Darren C. Barreiro argued the cause for amicus curiae
New Jersey Realtors® (Greenbaum Rowe Smith &
Davis LLP, attorneys; Barry S. Goodman and Darren C.
Barreiro, of counsel; Darren C. Barreiro and Conor J.
Hennessey, on the brief).
The opinion of the court was delivered by
OSTRER, J.A.D.
Are commissioned real estate salespersons exempt from the Wage
Payment Law (WPL)? That is the issue in this appeal on leave granted.
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. See N.J.S.A. 34:11-4.1. The trial
court denied the motion after declaring that the "ABC test" under the
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Unemployment Compensation Law (UCL), N.J.S.A. 43:21-19(i)(6)(A), (B), and
(C), 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." Id. at 295.
Although Hargrove involved a truck driver's WPL claim, the Court's broad
statement was unqualified. But Weichert contends the 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.
We affirm as modified the trial court's order denying Weichert's motion
to dismiss.
I.
We assume the facts in Kennedy's complaint. See Banco Popular N. Am.
v. Gandi, 184 N.J. 161, 166 (2005) (stating that, on a motion to dismiss for
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failure to state a claim, a court must assume a plaintiff's factual assertions and
extend to the plaintiff all favorable factual inferences). Kennedy contracted to
be a real estate salesperson for Weichert between August 8, 2012 and November
6, 2018.1 Weichert classified Kennedy as an independent contractor. It did the
same for the putative class of other real estate salespersons it contracted with
since March 25, 2013.
Nonetheless, Weichert "exercised a significant level of control and
direction" over Kennedy's and the class's work. Weichert required Kennedy to
work under its supervision and in its facilities. Kennedy could not charge
customers less than the sales commission Weichert set, but Weichert could
change the commission structure at will, and modify a marketing fee. Weichert
could withhold some of its listings from Kennedy, but Kennedy had to
"introduce" all his customers to real-estate related services that Weichert sold.
Kennedy could not work for other brokers while he worked for Weichert . He
had to join real estate organizations that Weichert belonged to, and he had to
pay the fees for doing so. Even if Weichert terminated him, which it retained
the right to do at will, all of Kennedy's prospects belonged to Weichert and
1
Kennedy did not attach the contract to his complaint and Weichert did not
submit it in support of its motion.
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Kennedy retained no right to compensation from transactions with them after he
left. Kennedy had to name Weichert as a co-insured on his automobile insurance
policy, but Weichert retained the right to control any litigation or dispute.
Relevant to his WPL claims, Kennedy alleged that Weichert compensated
him on a strictly commission basis, but it "made, took and/or required" at least
eighteen forms of "deductions" from his and the class's wages. The complaint
does not clearly say that Weichert subtracted these expenses from his
commissions, rather than "required" him to pay the expenses after he received
his commissions. The listed deductions include marketing fees, MLS fees for
listings and membership, and costs and expenses for collections and marketing.
The required payments included trade association dues, mail and travel costs,
and health and errors and omissions insurance. He also had to pay for his
business cards. Kennedy alleged these deductions unlawfully decreased his and
the class's wages that the WPL entitled them to receive.
II.
In lieu of an answer, Weichert moved to dismiss for failure to state a claim
because Kennedy, as a matter of law, was not an employee under the WPL.
Alternatively, Weichert asked the court to declare that the ABC test did not
apply, and that Weichert's and Kennedy's independent contractor agreement
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defined their relationship under the Brokers Act. Alternatively, Weichert asked
the court to apply "the traditional control test or the hybrid test" that the Court
applied to worker's compensation cases in Estate of Kotsovska, ex rel.
Kotsovska v. Liebman, 221 N.J. 568 (2015). 2
The trial judge declined Weichert's invitation to distinguish Hargrove.
The judge noted that the Court adopted the ABC test for WPL employee-vs-
independent-contractor questions without addressing those workers the UCL
exempts. The court's order denied the motion to dismiss and declared that the
ABC test governed. Thereafter, we granted Weichert's motion for leave to
appeal.
III.
A.
Since 1899, New Jersey law has protected employees' right to timely
payment of cash wages. See L. 1899, c. 38, § 1, formerly codified at N.J.S.A.
34:11-4, repealed by L. 1965, c. 173, § 13. The law entitled employees to wage
payment in "lawful money of the United States" every two weeks; it declared
2
The New Jersey Realtors unsuccessfully moved to intervene. We affirmed the
trial court's order denying intervention, and sua sponte granted the organization leave
to participate as amicus curiae and present argument, which it did. See Kennedy v.
Weichert, No. A-0395-19 (App. Div. Feb. 21, 2020).
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null and void agreements to the contrary; and imposed penalties for violations.
L. 1899, c. 38, §§ 1, 2.
The law was originally designed to combat "the practice prevalent among
factory owners, particularly by owners of glass factories in southern New Jersey,
of paying wages in the form of order books or scrip, redeemable only at
company-owned stores." Dep't of Labor & Indus. v. Rosen, 44 N.J. Super. 42,
45 (App. Div. 1957). More generally, the statute furthered the "economic and
social necessity" of assuring "payment in cash at regular intervals of wages upon
which an employee" and the employee's family depend for support. Id. at 46.
The statute penalized employers who did not pay workers their earned wages,
even if the employer simply lacked the money to do so. Id. at 49-50. The law
excluded agricultural workers and "watermen," but did not mention independent
contractors. L. 1899, c. 38; N.J.S.A. 34:11-4 (repealed 1965).3
3
Over forty states have some form of wage payment law to vindicate workers'
rights to their wages. See S. Samaro, The Case for Fiduciary Duty as a Restraint
on Employer Opportunism Under Sales Commission Agreements, 8 U. Pa. J.
Lab. & Emp. L. 441, 446 (2006); see, e.g., State ex rel. Nilsen v. Or. State Motor
Ass'n, 432 P.2d 512, 515 (Or. 1967) (stating that policy of wage payment law
"is to aid an employe[e] in the prompt collection of compensation due him and
to discourage an employer from using a position of economic superiority as a
lever to dissuade an employee from promptly collecting his agreed
compensation" and noting that "[t]he smaller the amount of the unpaid
compensation the greater is the need for assistance in effecting collection").
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In 1965, the Legislature modernized the wage payment law, and for the
first time, defined "employee" to mean "any person suffered or permitted to
work by an employer, except that independent contractors and subcontractors ,
shall not be considered employees." L. 1965, c. 173, § 1, codified at N.J.S.A.
34:11-4.1.4 The law expressly includes commissions as a form of wages. See
N.J.S.A. 34:11-4.1(c); Minoia v. Kushner, 365 N.J. Super. 304, 310 (App. Div.
2004).
Pertinent to Kennedy's claim, the law states that "[n]o employer may
withhold or divert any portion of an employee's wages unless" expressly
permitted by the WPL or by other laws. N.J.S.A. 34:11-4.4. For example, the
law expressly permits withholdings or diversions for retirement, health, and
profit-sharing plans, N.J.S.A. 34:11-4.4(b)(1); savings plans, N.J.S.A. 34:11-
4.4(b)(3); repayment of employee loans, N.J.S.A. 34:11-4.4(b)(4); and approved
charitable contributions, N.J.S.A. 34:11-4.4(b)(5). The law permits few
withholdings or diversions directly related to an employee's work performance,
but it does permit them for "safety equipment," N.J.S.A. 34:11-4.4(b)(4) and for
4
The new law removed the exclusion of agricultural workers and watermen,
but did not disturb a provision that, at the time, required bi-monthly wage
payments to railroad employees, L. 1911 c. 371, amended by L. 1974 c. 172,
and permitted monthly payment of wages to "bona fide executive, supervisory
and other special classifications of employees," N.J.S.A. 34:11-4.2.
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the rental and cleaning of work clothing, if authorized in advance by the
employees or their collective bargaining agreement, N.J.S.A. 34:11-4.4(b)(6).
The law also allows the Commissioner of Labor and Workforce Development to
authorize by regulation other "contributions, deductions and payments" if
approved by the employer. N.J.S.A. 34:11-4.4(b)(11).
The WPL's public policy goal remained unchanged: "to protect
employees' wages and to guarantee receipt of the fruits of their labor." Rosen
v. Smith Barney, Inc., 393 N.J. Super. 578, 585 (App. Div. 2007), aff'd, 195 N.J.
423 (2008).
B.
We do not write on a clean slate in deciding if Kennedy, a fully
commissioned real estate salesperson, is an employee or an independent
contractor under the WPL. As we noted at the outset, the Supreme Court broadly
declared that the ABC test determines if a person is an employee or an
independent contractor under the WPL. Hargrove, 220 N.J. at 295.
To satisfy the ABC test, a person must demonstrate:
(A) Such individual has been and will continue to be
free from control or direction over the performance of
such service, both under his contract of service and in
fact; and
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(B) Such service is either outside the usual course of
the business for which such service is performed, or
that such service is performed outside of all the places
of business of the enterprise for which such service is
performed; and
(C) Such individual is customarily engaged in an
independently established trade, occupation, profession
or business.
[N.J.S.A. 43:21-19(i)(6)(A),(B),(C); see also Hargrove,
220 N.J. at 305.]
The Court applied the same test to the employee-status question under the
Wage and Hour Law (WHL), which sets a minimum wage and limits hours of
work. Id. at 312. Like the WPL, the WHL refers to suffering or permitting work
in defining employ or employee, see N.J.S.A. 34:11-56a1(f) (stating
"'[e]mploy'" includes to suffer or permit to work") and N.J.S.A. 34:11-56a1(h)
(stating "'[e]mployee' includes any individual employed by an employer").
Although the WHL does not expressly exclude independent contractors, it has
been interpreted to do so. See Hargrove, 220 N.J. at 304 (noting that the WHL
"does not prescribe the minimum wage or overtime rate payable
to independent contractors"). The Court reasoned that the same test should
apply to both statutes because they both "address the most fundamental terms of
the employment relationship," and "[s]tatutes addressing similar concerns
should resolve similar issues . . . by the same standard." Id. at 313. The Court
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noted that "[t]he WPL is designed to protect an employee's wages and to assure
timely and predictable payment" and the "WHL is designed to protect employees
from unfair wages and excessive hours" by "establish[ing] a minimum wage for
employees and the overtime rate for each hour of work in excess of forty hours
in any week." Ibid.
In deciding to apply the ABC test to the WPL and WHL, the Court
deferred to the view of the agency that enforces both laws. Id. at 312
(concluding "that no good reason has been presented to depart from the standard
adopted by the DOL"). In 1995, the Department of Labor expressly incorporated
the ABC test in its WHL regulations. 27 N.J.R. 3958 (Oct. 16, 1995); N.J.A.C.
12:56.16.1 (stating "[t]he criteria identified in the Unemployment Compensation
Law at N.J.S.A. 43:21-19(i)(6)(A)(B)(C) and interpreting case law will be used
to determine whether an individual is an employee or independent contractor for
purposes of the Wage and Hour Law").
The department did not adopt a comparable provision in its WPL
regulation, N.J.A.C. 12:55-1.2, which simply tracks the WPL's statutory
definition. But, in its comments adopting the WHL regulation, the department
said it "feels that it is necessary to include reference to this criteria [that is, the
ABC test] in the Wage and Hour rules since an individual's employment status
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impacts determinations concerning entitlements under the minimum wage,
overtime, wage payment and wage collection statutes." 27 N.J.R. 3958
(emphasis added); see also Hargrove, 220 N.J. at 303 (citing this regulatory
history). As amicus curiae in Hargrove, the department also informed the Court
that it "applied the 'ABC' test for independent contractor determinations under
the WPL as well." Ibid. For example, the agency did so in New Jersey
Department of Labor and Workforce Development v. SG America, Inc., 2011
N.J. AGEN LEXIS 67 (Mar. 18, 2011), where it affirmed penalties for WPL as
well as WHL violations after applying the ABC test to determine that a garment
worker was an employee and not an independent contractor.
In its 1995 rulemaking, the department initially proposed the "economic
realities" test that federal courts apply to determine independent-contractor
status under the Federal Fair Labor Standards Act (FLSA):
1. The degree of the alleged employer's right to
control the manner in which the work is performed;
2. The alleged employee's opportunity for profit or
loss depending upon the managerial skill;
3. The alleged employee's investment in equipment
or materials required for his or her task, or his or her
employment of helpers;
4. Whether the service rendered requires a special
skill;
5. The degree of permanence of the working
relationship; and
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6. Whether the service rendered is an integral part
of the alleged employer's business.
[27 N.J.R. 2871 (Aug. 7, 1995).]
See, e.g., Donovan v. DialAmerica Mktg., Inc., 757 F.2d 1376, 1383-88 (3d Cir.
1985) (applying the six-factor "economic realities" test in FLSA case).
But the department ultimately opted to formally adopt the ABC test, even
though the WHL's definitions mirror those in the FLSA, see 29 U.S.C. 203(g)
(stating "'[e]mploy' includes to suffer or permit to work") and 29 U.S.C.
203(e)(1) (stating "'[e]mployee' means any individual employed by an
employer").5 Business interests objected to the FLSA standard because it
"appear[ed] to expand the present 'ABC Test'" and might deny independent-
contractor status to certain unskilled workers. 27 N.J.R. 3958 (Oct. 16, 1995) .
The Hargrove Court likewise declined to adopt the FLSA test. The Court
concluded that the New Jersey department's reliance on the ABC test, which
requires that independent contractors satisfy all three factors A, B, and C,
5
The United States Supreme Court has stated, regarding that definition, "A
broader or more comprehensive coverage of employees within the stated
categories would be difficult to frame." United States v. Rosenwasser, 323 U.S.
360, 362 (1945). The FLSA definition "stretches the meaning of 'employee' to
cover some parties who might not qualify as such under a strict application of
traditional agency law principles." Nationwide Mut. Ins. Co. v. Darden, 503
U.S. 318, 326 (1992). As noted, the WPL and WHL also use the suffer-or-
permit language.
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"operates to provide more predictability" than the FLSA multi-factor 'economic
realities' standard" in which no single factor is determinative. Hargrove, 220
N.J. at 314. The Court opined that the WPL and WHL might overall cast a
"wider net" using the ABC test. Ibid. The Court also noted that the department's
approach "presumes that the claimant is an employee and imposes the burden to
prove otherwise on the employer." Ibid.
C.
Turning to the issue at hand, Weichert argues that, despite the Hargrove
Court's broadly-worded holding, the ABC test does not control whether a fully
commissioned real estate salesperson is an employee or independent contractor
under the WPL.
At the outset, we reject Weichert's argument that the only Hargrove
holding worthy of stare decisis treatment pertains to truck drivers. Without
limitation, the Court "conclude[d] 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." Hargrove, 220 N.J. at 295. We need
not decide if the Court's conclusion is dictum as applied to anyone but truck
drivers. We are "bound by [the] Court's pronouncements, whether classified as
dicta or not." State v. Dabas, 215 N.J. 114, 136-37 (2013). At the same time,
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we remain free "to fill lacunae in the law," Pannucci v. Edgewood Park Senior
Hous. – Phase 1, LLC, 465 N.J. Super. 403, 414 (App. Div. 2020) (quoting A.N.
ex rel. S.N. v. S.M. ex rel. S.M., 333 N.J. Super. 566, 579-80 (App. Div. 2000)
(Kestin, J., concurring)). So, the question is whether the Court left any daylight
between its declaration that the ABC test applies to WPL employee-status
questions, and the issue presented here.
Weichert presents two principal reasons why the ABC test does not apply
here, despite Hargrove's ABC-test endorsement: first, the UCL, which includes
the ABC test, exempts fully commissioned real estate salespersons; second, the
ABC test is inconsistent with the Brokers Act's more specific provisions on real
estate salespersons' status. We address these issues in turn.
1.
Weichert highlights that, unlike the truck drivers in Hargrove, real estate
salespersons are expressly exempt from the UCL, regardless of the ABC test.
See N.J.S.A. 43:21-19(i)(7)(K) (stating "the term 'employment' shall not include
. . . [s]ervices performed by real estate salesmen or brokers who are compensated
wholly on a commission basis"). Thus, Weichert contends, the Hargrove Court
did not confront the issue whether it was appropriate to apply the UCL's ABC
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test to a WPL employment status dispute involving persons whom the law
expressly exempts without resort to the ABC test. 6
We reject Weichert's (and amicus's) argument that real estate salespersons
are exempt, as a matter of law, from the WPL, because they are exempt from the
UCL. To decide if a worker is an employee under a statute or under a common
law rule, a court must consider the statute's terms and purpose. "[I]n each
setting-specific analysis, what matters most is that an individual's status be
measured in the light of the purpose to be served by the applicable legislative
program or social purpose to be served." D'Annunzio v. Prudential Ins. Co. of
Am., 192 N.J. 110, 122 n.7 (2007). "An individual may be considered an
employee for some purposes but an independent contractor for others. "
MacDougall v. Weichert, 144 N.J. 380, 388 (1996); see also Gil v. Clara Maass
Med. Ctr., 450 N.J. Super. 368, 389 (App. Div. 2017) (Ostrer, J., concurring)
(comparing various "employee" tests). Also, a court "must look beyond the label
attached to [a] relationship" and consider its underlying features, to decide if it
creates an employment or an independent-contractor relationship. D'Annunzio,
192 N.J. at 122.
6
Weichert also contends there is no evidence that the department has ever
actually applied the ABC test to determine if the WPL or WHL applies to real
estate salespersons.
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The Hargrove Court determined that, given the common employee-
protection goals of the WPL and the WHL, the general test for independent
contractors should be the same. Although the Court approved the department's
use of the UCL's ABC test, the Court did not read the UCL in pari materia with
those other two laws.
Furthermore, in specially treating real estate salespersons under the UCL,
the Legislature did not alter the generally applicable independent contractor test.
The Legislature evidently granted real estate brokers and salespersons an
exemption not because the ABC test did not apply; but because it did.
The exemption's history is instructive. The exemption was modeled on
one for insurance agents. Insurance agents were found not to meet the ABC test
for independent-contractor status. See Superior Life, Health and Acc. Ins. Co.
v. Bd. of Review, 127 N.J.L. 537, 539-40 (Sup. Ct. 1942). The Legislature then
exempted wholly commissioned insurance agents "exclusive of industrial life
insurance agents." See L. 1941, c. 385, codified at N.J.S.A. 43:21-19(i)(7)(J).
The real estate exemption soon followed, with the drafters expressing the intent
to place real estate brokers and salespersons "on the same par with insurance
agents." Statement to A. 64 (L. 1946, c. 37).
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Notably, neither exemption was unqualified. Real estate brokers and
salespersons are exempt only if compensated wholly on a commission basis.
The Legislature expressly withheld the insurance agent exemption from
industrial life insurance agents, who typically were assigned territories to collect
premiums from persons already insured. See Washington Nat'l Ins. Co. v. Bd.
of Review, 137 N.J.L. 596, 597 (Sup. Ct. 1948). That distinction does not
necessarily relate to the agents' respective degree of independence from the
insurer paying the compensation.
We reject Weichert's argument that "[i]t would be a perverse result" if the
UCL's ABC test rendered Kennedy an employee under the WPL, while the UCL
exempts Kennedy from coverage. As noted, a person may be an employee under
one statute and not another. Had the Legislature intended to exempt real estate
salespersons from the WPL's reach, it could have said so. The Legislature
obviously found good cause to exempt commissioned real estate salespersons
from the UCL. Perhaps, the Legislature believed real estate salespersons should
not qualify for unemployment compensation because of their control over when
and where they work. At the same time, the Legislature evidently found no
sound reason to deny real estate salespersons their right under the WPL to timely
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payment of compensation they already have earned, without unauthorized
withholdings or diversions.7
Notably, the UCL exempts twenty-five specific categories of workers
from covered "employment." See N.J.S.A. 43:21-19(i)(7)(A) to (Z); Carpet
Remnant Warehouse, Inc. v. N.J. Dep't of Labor, 125 N.J. 567, 580-81 (1991)
(noting exemptions). Exemptions from the minimum wage under the WHL
include persons engaged in motor vehicle sales and "outside sales," N.J.S.A.
34:11-56a(4)(a), but the WHL does not expressly exempt commissioned real
estate salespersons. 8 Outside salespersons, as well as individuals working in a
"bona fide executive, administrative, professional" capacity are also exempt
from overtime requirements. N.J.A.C. 12:56-7.1; see also N.J.S.A. 34:11-
56a(4)(b)(1). Yet, the Legislature has included no industry-specific exemptions
under the WPL (jettisoning the previous exemptions for agricultural workers
7
If certain withholdings or diversions are essential to the common business
model of brokers and real estate salespersons, the Legislature could specifically
authorize those deductions, rather than exempt real estate salespersons from the
law's protections entirely.
8
See Donovan v. Walter W. Cheney, Inc., 510 F. Supp. 748 (D.N.H. 1981)
(holding that FLSA applied to wholly commissioned real estate salespersons
who received no salary or draw against commission, but were required to
perform "floor" work and spent more than twenty percent of their time on
matters not related to their personal sales efforts, such as answering telephones);
see also Luther v. Z. Wilson, Inc., 528 F. Supp. 1166 (S.D. Ohio 1981).
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and watermen), placing only independent contractors and subcontractors
entirely beyond its reach.
In sum, we conclude 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.
2.
We next turn to Weichert's contention that applying the ABC test in this
case is inconsistent with the Brokers Act, which defines aspects of the
relationship between brokers and licensed salespersons. We generally reject
Weichert's contention, because any inconsistency only arises on and after
August 10, 2018, the effective date of amendments to the Brokers Act. L. 2018,
c. 71, § 29.
The Supreme Court in Re/Max of New Jersey, Inc. v. Wausau Insurance
Cos. held that the Brokers Act "define[d] a real estate agent or salesperson as an
employee of the broker" and established an "employer-employee relationship"
between a salesperson and a broker. 162 N.J. 282, 287-88 (2000). The Court
noted that the Brokers Act at the time "provide[d] that a real estate agent or
salesperson is one 'who, for compensation, valuable consideration or
commission, or other things of value, . . . is employed by and operates under the
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supervision of a licensed real estate broker . . . .'" Ibid. (quoting N.J.S.A. 45:15-
3 (1993)). Throughout the Brokers Act, the relationship between a broker and
a licensed salesperson was described as an employment relationship. For
example, real estate brokers are required to prominently display the license
certification of "all licensed persons in his employ." N.J.S.A. 45:15-12. "All
licenses issued to . . . salespersons shall be kept by the broker by whom such
real estate licensee is employed" and "[w]hen any real estate licensee is
terminated or resigns his employment with the real estate broker by whom he
was employed at the time of the issuing of such license to him, notice of the
termination shall be given in writing." N.J.S.A. 45:15-14 (1993). Also, upon
termination "such employer" shall notify the Real Estate Commission. Ibid.And, if a broker loses his or her license, that automatically suspends "every real
estate . . . salesperson's license granted to employees of the broker." N.J.S.A.
45:15-15 (1996).
The question in Re/Max was whether the real estate salespersons were
employees under the Workers' Compensation Act. The trial court held that they
were, under both the "control test" and the "relative nature of the work test."
Re/Max of New Jersey, Inc. v. Wausau Ins. Cos., 304 N.J. Super. 59, 65-69 (Ch.
Div. 1997). We affirmed for the reasons stated, highlighting the court 's use of
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the "relative nature of the work test." Re/Max of New Jersey, Inc. v. Wausau
Ins. Cos., 316 N.J. Super. 514, 516 (App. Div. 1998). The Supreme Court
affirmed on the basis of the trial court's opinion. Re/Max, 162 N.J. at 286. The
Court held that Re/Max agents were employees, despite the broker's
"sophisticated attempt to thwart the employer-employee relationship established
as a matter of public policy under the Brokers Act and the implementation of
the Workers' Compensation Act." Id. at 288.
We recognize the case addressed salespersons' status under the Workers'
Compensation Act, and not the WPL. However, Weichert has presented no
policy inherent in the Workers Compensation Act and the WPL for affording a
salesperson workers compensation if he or she, say, tripped and broke an ankle
on the job, but uniformly denying that same salesperson the right under the WPL
to prompt payment of his or her compensation without unauthorized
withholdings or diversions. Furthermore, the Hargrove Court later determined
the ABC test, which casts a wider net than other tests, should apply to WPL
employee-status questions.
However, eighteen years after the Court's holding in Re/Max, the
Legislature extensively amended the Brokers Act to expressly authorize
independent contractor relationships between brokers and salespersons. The
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2018 statute included a provision expressly stating that "[n]otwithstanding any
provision of R.S.45:15-1 et seq. [the Brokers Act] or any other law, rule, or
regulation to the contrary, a business affiliation between a broker and a broker -
salesperson or salesperson may be that of an employment relationship or the
provision of services by an independent contractor." L. 2018, c. 71, § 3(b),
codified at N.J.S.A. 45:15-3.2(b). The amendments required that every
salesperson enter into a written agreement with his or her broker before starting
work, L. 2018, c. 71, § 3(a), codified at N.J.S.A. 45:15-3.2(a), and "[t]he nature
of the business affiliation shall be defined in the written agreement," L. 2018, c.
71, § 3(b), codified at N.J.S.A. 45:15-3.2(b). The amendments also added the
words "or contracted" almost everywhere the word "employed" was found in the
act, and added "or contractors" after the word "employees." See L. 2018, c. 71.9
The Brokers Act amendments may affect the application of a test for
determining a real estate salesperson's employment status under the WPL. The
amendments not only authorized independent contractor relationships; they did
so, "[n]otwithstanding . . . any other law, rule, or regulation to the contrary" and
9
The change was not made everywhere. For example, the Brokers Act still
states that a broker's office shall prominently display "the license certificate of
. . . all licensed persons in his employ," N.J.S.A. 45:15-12, without mentioning
those "contracted."
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"[n]otwithstanding any provision" of the Brokers Act to the contrary. Based on
the 2018 statute's plain language, the Legislature evidently concluded that an
independent contractor relationship could subsist, even though a broker
exercised the extensive controls over his or her salespersons that the Brokers
Act required.
In other words, it would be inconsistent with the intent of the 2018 statute
to apply an employment status test in such a way that it would deny independent-
contractor status solely on the basis of compliance with Brokers Act
requirements. For example, a real estate salesperson may receive commissions
only through his or her broker. N.J.S.A. 45:15-16. A salesperson may not sue
anyone for a commission other than his or her broker. N.J.S.A. 45:15-3. A
salesperson's license shall be kept by his or her brokers, and upon termination
or resignation, the salesperson lacks authority to earn commissions until
licensed by the Commission through another broker. N.J.S.A. 45:15-14. These
provisions, which require salespersons to submit to the control of his or her
broker, should not preclude a salesperson's independent-contractor status. Cf.
Laurel Sports Activities v. Unemployment Comp. Comm'n, 135 N.J.L. 234, 237
(Sup. Ct. 1947) (finding various wrestling and boxing participants were free of
control of wrestling and boxing promoter because "[t]he details of employment
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and control over the referees, timekeepers, announcers, boxers and wrestlers are
so completely exercised by the State that the promoter has no control or direction
whatever, save as noted").
However, we are unpersuaded by Weichert's argument that the 2018
amendments were curative and therefore retroactive. Curative amendments are
retroactive because they are "designed merely to carry out or explain the intent
of the original statute," or "remedy a perceived imperfection in or misapplication
of" the statute. Johnson v. Roselle EZ Quick LLC, 226 N.J. 370, 388 (2016)
(quoting Nelson v. Bd. of Educ. of Twp. of Old Bridge, 148 N.J. 358, 370
(1997)); see also Pisack v. B&C Towing, Inc., 240 N.J. 360, 371 (2020). A
curative amendment must not change the original law's meaning. James v. N.J.
Mfrs. Ins. Co., 216 N.J. 552, 564 (2014).
We doubt the Legislature intended the 2018 amendments to be curative
and retroactive. There are three reasons. First, there is the statute's effective
date provision. The Governor approved the Brokers Act amendments on August
10, 2018. The statute expressly provided that all the amendments were
retroactive to January 1, 2018 except section 3, authorizing independent
contractor and employee relationships "notwithstanding . . . any other law, rule,
or regulation to the contrary." That section was effective only upon enactment.
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L. 2018, c. 71, § 29. Had the Legislature intended section 3 to apply
retroactively, it presumably would not have made it effective eight months afte r
the rest of the 2018 amendments.
Second, there is the matter of timing. The Re/Max Court declared in 2000
that the Brokers Act established an employer-employee relationship. The
Legislature amended the Brokers Act in 2009 without altering the provisions on
the employee-status issue. See L. 2009, c. 238. Rather, the 2009 statute created
a new licensee – real estate referral agents – and provided that they, like other
licensees, are "employed by . . . a licensed real estate broker." L. 2009, c. 238,
§ 2. Another nine years later, the Legislature altered the provisions defining the
relationship between salespersons and brokers.
We appreciate that "[l]egislative inaction" can sometimes be a "weak reed
. . . upon which to rely." Masse v. Bd. of. Trs., Pub. Emps. Ret. Sys., 87 N.J.
252, 264 (1981) (quoting 2A Sutherland, Statutory Construction, § 49.10 (4th
ed. 1973)). But we cite the inaction not to infer the Legislature approved of the
Re/Max interpretation. Cf. Ibid. (rejecting inaction as a sign of approval). We
cite the inaction to reject the inference that the Legislature not only disapproved
it, but intended to cure it retroactively, and it just took eighteen years and a
second amendatory statute for the Legislature to get around to the task.
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Third, in the accompanying bill and committee statements, the Legislature
did not express an intent to clarify the law or correct a misapplication of it. Cf.
Nelson, 148 N.J. at 370 (noting legislative history expressing intent to clarify
and correct misapplication of statute and provision that the amendment would
apply to persons who previously acquired rights under the earlier statute).
Rather, the Legislature expressed its intent to codify certain recent Real Estate
Commission regulations authorizing independent contractor agreements.
[T]he bill codifies two existing provisions of
regulations promulgated by the New Jersey Real Estate
Commission. First, the bill mandates that two hours of
continuing education courses be taken in the topic of
ethics. Second, the bill requires a written agreement
defining the business affiliation between a broker and a
broker-salesperson or salesperson and the terms under
which the services of the broker-salesperson or
salesperson have been retained by the broker. The bill
provides that the business affiliation between a broker
and a broker-salesperson or salesperson may be that of
an employment relationship or independent contractor
relationship.
[Sponsor's Statement to S. 430 (L. 2018, c. 71).]
The Real Estate Commission had adopted regulations effective July 3,
2017 redacting references to employment in its regulation governing broker -
salespersons agreements, and stating that it "interprets 'employment agreement,'
'employ,' and 'employing broker'" in [the Brokers Act] "to permit an employment
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relationship or an independent contractor relationship between a broker and a
broker-salesperson, salesperson, or referral agent." See N.J.A.C. 11:5-4.1(j); 49
N.J.R. 1910(a) (July 3, 2017). In its rule proposal, the Commission stated that
"[h]istorical practice as well as current practice indicates that licensees
determine the nature of their business relationship." 48 N.J.R. 1900(a) (Sep. 19,
2016).
However, the Commission was not empowered to overturn the Re/Max
Court's interpretation that the Brokers Act "defines a real estate agent or
salesperson as an employee of the broker," 162 N.J. at 287, and "established as
a matter of public policy" an "employer-employee relationship," id. at 288.10
Nor was the Commission empowered to limit the reach of another statute, such
as the WPL, that depends on determining a person's employment status. As we
have noted, a person may be an employee under one statute and not another. See
10
We recognize that the United States Supreme Court has held, as a corollary
to its Chevron doctrine, see Chevron, U.S.A. v. NRDC, 467 U.S. 837 (1984),
that "[a] court's prior judicial construction of a statute trumps an agency
construction otherwise entitled to Chevron deference only if the prior court
decision holds that its construction follows from the unambiguous terms of the
statute and thus leaves no room for agency discretion." Nat'l Cable &
Telecomm. Ass'n v. Brand X Internet Servs., 545 U.S. 967, 982 (2005). Even if
our Court were to adopt this rule because it "has applied a Chevron-like
deference" to state agencies' statutory interpretation, see In re RCN of NY, 186
N.J. 83, 93 (2006), the rule does not apply here. The Re/Max court identified
no ambiguity in the Brokers Act and, on its face, there was none.
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MacDougall, 144 N.J. at 388. And, the Department of Labor and Workforce
Development, not the Real Estate Commission, exercises the responsibility to
enforce and administer the WPL, N.J.S.A. 34:11-4.9, and to promulgate
implementing regulations, N.J.S.A. 34:11-4.11. Therefore, the department, not
the commission, is owed deference in interpreting the meaning of "independent
contractor" under the WPL. See Hargrove, 220 N.J. at 301-02.
In sum, the Brokers Act amendments are prospective in effect.
Consequently, at most, they can have only a minor impact on the dispute before
us. 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. So, the Brokers Act amendments would apply only to the last three
months or so of Kennedy's relationship with defendant.
With the slim record before us, we decline to declare the amendments'
impact on Kennedy's and the putative class's allegations for that brief period.
We also decline to endorse the trial court's declaration that the ABC test
governed Kennedy's employment-status for the period after August 10, 2018.
Rather, determining the appropriate test and defining the parties' post-August
10, 2018 relationship should await development of a full factual record. Neither
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party presented their contract, or any amendments that may have been added
over the years Kennedy worked for Weichert.
Although the Supreme Court declared we must "look beyond the label" to
decide if someone is an employee or an independent contractor, D'Annunzio,
192 N.J. at 122, Weichert argues the 2018 amendment empowers parties to label
their relationship however they want. But stating that parties' "business
affiliation shall be defined in the written agreement," L. 2018, c. 71, § 3(b),
codified at N.J.S.A. 45:15-3.2(b), may mean only that the written agreement
shall specify the parties' respective rights and duties and those features shall
define the relationship. We need not resolve this question either, both because
the parties' contract is not before us, and it was, in any event, executed before
the amendment's effective date.
IV.
In sum, we affirm the trial court's denial of Weichert's motion to dismiss.
We conclude 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 trial court should determine the appropriate test in light of a full
factual record. Particularly at this early stage of the litigation, and in light of
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the slim record before us, we express no opinion regarding whether plaintiffs
will ultimately succeed under the ABC test for the period before August 10,
2018, or under the test that the court determines for the subsequent period.
Affirmed as modified.
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