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Coronavirus in the World of Real Estate: Legal and Regulatory Concerns

Apr 10, 2020 12:00:00 AM

COVID-19 is having an increasing impact on the way we conduct business and most certainly on buying and selling houses.  This author can personally attest to the impact on the real estate industry.  We had unfortunate time and listed our house just days before the initial wave of COVID-19 diagnosis hit the U.S.  As realtors across the state will tell you, all showing, buying (unless already heading to closing), and selling activity came to a screeching halt.  The real estate industry is feeling the impact and employers are left wondering how to respond.  In the attached article we cover many of the applicable employment laws employers must consider when making decisions that impact an employee’s employment arrangements. 

One of the threshold considerations for employers is the Occupational Health and Safety Act (OSHA) General Duty Clause.  The OSHA General Duty clause imposes a general requirement on an employer to keep its workplace free of any recognized hazards that are likely to cause death or serious physical harm to its employees. An employer violates the general duty clause if:

  • The employer failed to keep the workplace free of a hazard to which employees were exposed.
  • The hazard was recognized.
  • The hazard was likely to cause death or serious physical harm.
  • There was a feasible and economically viable way to correct the hazard

The General Duty Clause lays the foundation for an employer’s obligation to consider a number of measures to keep their employees safe. More specifically, in the real estate industry an employer must consider the risk of infection by employees and clients.  Additionally, while not a safety concern, the decline in prospects may likewise have a significant impact on an agent’s ability to earn a living.  There are a number of laws that employers must consider as they make operational decisions.

For example, the Fair Labor Standards Act (FLSA) governs how employers pay employees and imposes specific rules regarding exempt and non-exempt employees. According to the Department of Labor, real estate firms that are subject to the Fair Labor Standards Act (some may not be) may be required to classify their employees as “exempt” (see DOL Fact Sheet for more information on applicability of FLSA to the real estate industry and DOL Opinion Letter regarding the classification rules). Employers may not make deductions from an exempt employee’s pay based on hours worked but are required to pay non-exempt employees for all actual hours worked.   When reducing an exempt employee’s schedule, the employer may still be on the hook for the entire week of pay.  However, when reducing a non-exempt employee’s schedule, the employer will be on the hook only for actual hours worked by the employee.

In many cases, a real estate firm may classify their agents as 1099 Independent Contractors.  Assuming the classification is legally correct, the firm may not be subject to most of the employment laws including the FLSA (see NAR white paper on this topic).

The attached white paper provides employers with more specific guidance and information regarding the possible impact of the Coronavirus on the workplace and the various rules that employer must consider. 

About the author:

Carrie ChervenyCarrie B. Cherveny, Esq., is SVP, Strategic Client Solutions for global insurance brokerage Hub International’s Risk Services Division.

 

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