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Monell v. Boston Pads, LLC

Supreme Judicial Court of Massachusetts, Suffolk

June 3, 2015

Nesto Monell & others [1]
Boston Pads, LLC, & others. [2]

Argued: December 2, 2014.

Civil action commenced in the Superior Court Department on October 17, 2011.

A motion for partial summary judgment was heard by Robert C. Cosgrove, J., and entry of final judgment was ordered by Edward P. Leibensperger, J.

The Supreme Judicial Court granted an application for direct appellate review.

Hillary Schwab ( Brant Casavant with her) for the plaintiffs.

Stephen M. Perry ( Robert S. Kutner with him) for the defendants.

Ian O. Russell & Nicole Horberg Decter, for Massachusetts Employment Lawyers Association & another, amici curiae, submitted a brief.

Philip S. Lapatin & Nathaniel F. Hulme, for Massachusetts As-

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sociation of Realtors & another, amici curiae, submitted a brief.

Present: Spina, Cordy, Botsford, Duffly, Lenk, & Hines, JJ.


[31 N.E.3d 61] Hines, J.

We granted the plaintiffs' application for direct appellate review to determine whether the independent contractor statute, G. L. c. 149, § 148B, which makes it a violation of the statute to fail " to properly classify an individual as an employee," applies to real estate salespersons licensed [31 N.E.3d 62] under, and affiliated with and working for a licensed brokerage firm pursuant to G. L. c. 112, § 87RR. A Superior Court judge concluded that the independent contractor statute did not apply in these circumstances to the salespersons in this industry. We affirm.

1. Background.

We summarize the material undisputed facts. The defendants Jacob Realty, LLC (Jacob Realty); NextGen Realty, Inc. (NextGen); and RentMyUnit.Com, Inc., doing business as Boardwalk Properties (Boardwalk Properties) (collectively, business entities), are licensed Massachusetts real estate brokerage firms that are in the business of renting and selling real estate in Massachusetts.[3] The defendants Demetrios Salpoglou and Yuan Huang are members of Jacob Realty and shareholders of NextGen and Boardwalk Properties, and are involved in the operations of these business entities. Salpoglou serves as the broker of record for the business entities.

The plaintiffs Nesto Monell, Jonathan Gibson, Rachael Butcher, and Lindsey Burnes were licensed real estate salespersons who worked for Jacob Realty under its real estate broker's license. The plaintiff Ann McGovern was a licensed real estate salesperson who worked for NextGen under its real estate broker's license. The plaintiff Benjamin Smith was a licensed real estate salesperson who worked for Boardwalk Properties under its real estate broker's license.

Throughout the course of their relationship, the defendant business entities classified the plaintiffs as independent contractors.[4] The defendant entities required the plaintiffs to work sixty

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" front desk hours" during training[5] and, thereafter, in some cases complete monthly " office hours" duty, which involved answering telephone calls from, and greeting, prospective clients.[6] The salespersons were able to select the " office hours" that they wished to work. The business entities, however, allowed salespersons only one shift change every two months.

At the commencement of their relationship with the business entities, the plaintiffs signed nondisclosure, nonsolicitation, and noncompete agreements[7] and were [31 N.E.3d 63] required to undergo a training program. The business entities encouraged the plaintiffs to purchase a day planner and required them to obtain a cellular telephone with a " 617" area code,[8] to adhere to a dress code, and to submit to various disciplinary actions if they did not meet their productivity goals.

The defendant entities compensate their salespersons pursuant to a commission policy. Under the policy salespersons are paid on a " commission-only basis" and expressly will not be treated as employees " with respect to compensation for taxes or any other purpose." A commission is earned on completion by the salesperson of a rental or sales transaction involving a client's real estate. The commission due to the salesperson usually amounts to a percentage (typically fifty per cent) of a transaction's gross commission, less any applicable deductions.[9] The business entities receive the balance as their portion of the fee charged to the

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client. Commissions are paid " only when a transaction is completed in its entirety" as defined by the policy. Pursuant to the policy, the business entities " will issue [a] Form 1099-MISC" to each salesperson and each salesperson " agrees to provide [the business entities] with a signed W-9 [form]." Thus, the plaintiffs were responsible for paying their own taxes.

In 2011, the plaintiffs filed a complaint against the defendants in the Superior Court. As relevant here, the plaintiffs alleged that the defendants violated the independent contractor statute by misclassifying them as independent contractors when they actually were employees. [10] On this count of the complaint, the plaintiffs moved for partial summary judgment, which the judge denied. The judge then granted partial summary judgment in favor of the defendants.[11] The judge determined that there is a conflict between the independent contractor and real estate licensing statutes insofar as a real estate salesperson would not be able to satisfy all three indicia of an independent contractor relationship while simultaneously complying with the real estate licensing statute. Based on his determination that the real estate licensing statute was more recently amended and is more specific than the independent contractor statute, the judge concluded that, pursuant to ...

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