{"id":236,"date":"2020-09-03T06:45:00","date_gmt":"2020-09-03T06:45:00","guid":{"rendered":"https:\/\/www.realtrends.com\/blog\/2020\/09\/03\/comparing-republican-and-democratic-platforms-on-real-estate-industry-impacts\/"},"modified":"2025-03-13T02:00:34","modified_gmt":"2025-03-13T02:00:34","slug":"comparing-republican-and-democratic-platforms-on-real-estate-industry-impacts","status":"publish","type":"post","link":"https:\/\/www.realtrends.com\/blog\/2020\/09\/03\/comparing-republican-and-democratic-platforms-on-real-estate-industry-impacts\/","title":{"rendered":"Comparing Republican and Democratic Platforms on Real Estate Industry Impacts"},"content":{"rendered":"<p style=\"vertical-align: middle;\"><em><span style=\"font-size: 13.0pt; color: #445b63;\">Independent contractors and franchiser-franchisee business relationships face potential challenges ahead.<\/span><\/em><\/p>\n<p><!--more--><\/p>\n<p style=\"vertical-align: middle;\"><span style=\"font-size: 10.0pt; color: black;\">Recently, I read the 2020 Democratic Party Platform report (91 pages) and the 2020 Republican Party Platform report (59 pages). The Republican Party report is actually the same as the 2016 report.<\/span><\/p>\n<p style=\"vertical-align: middle;\"><span style=\"font-size: 10.0pt; color: black;\">The Republican Party Platform did not reference independent contractors or franchiser-franchisee business relation-ships. We do know from our research that the Republicans in the U.S. House of Representatives voted almost entirely against the PRO Act and further have read that the Trump administration\u2019s National Labor Relations Board (NLRB) reversed the Obama administration\u2019s rulings on the joint employer issue.<\/span><\/p>\n<p style=\"vertical-align: middle;\"><span style=\"font-size: 10.0pt; color: black;\">To be fair, there is much to like in both platforms in their support of home-ownership in general and the belief that more needs to be done to address both the critical areas of homelessness and affordability. Both parties discuss these two issues at some great length.<\/span><\/p>\n<p style=\"vertical-align: middle;\"><span style=\"font-size: 10.0pt; color: black;\">Regardless of your political or social views, there are a few provisions that could have a substantial and material effect on the residential brokerage business in the years ahead. These have to do with who can be classified as <\/span><em><span style=\"font-size: 10.0pt; color: black;\">Independent Contractors (IC) <\/span><\/em><span style=\"font-size: 10.0pt; color: black;\">and whether or not franchisers and their franchisees can be considered<\/span><em><span style=\"font-size: 10.0pt; color: black;\"> joint employers.<\/span><\/em><\/p>\n<h4 style=\"vertical-align: middle;\"><span style=\"font-size: 10.0pt; color: #d80000;\">The ABC test and Its Impact on Independent Contractors<\/span><\/h4>\n<p style=\"vertical-align: middle;\"><span style=\"font-size: 10.0pt; color: black;\">On page 15 of the Democratic Party report, it states, \u201cDemocrats believe employees who are being misclassified, including gig and platform workers, deserve wage and workplace protections including minimum wage and overtime pay, and we support using the ABC test to determine employees\u2019 status.\u201d<\/span><span style=\"font-size: 10.0pt; color: black;\">&nbsp;<\/span><\/p>\n<p style=\"vertical-align: middle;\"><span style=\"font-size: 10.0pt; color: black;\">For those who didn\u2019t follow the develop<\/span><span style=\"font-size: 10.0pt; color: black;\">ment of the ABC test in California over the past few years, the ABC test contains the following requirements used to determine whether one can be classified as an IC or not:<\/span><span style=\"font-size: 10.0pt; color: black;\">&nbsp;<\/span><\/p>\n<p style=\"vertical-align: middle; padding-left: 11pt;\"><strong><span style=\"font-size: 10.0pt; color: #a80000;\">Part A <\/span><\/strong><span style=\"font-size: 10.0pt; color: black;\">of the test requires that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the perfor<\/span><span style=\"font-size: 10.0pt; color: black;\">mance of the work and in fact, AND;<\/span><\/p>\n<p style=\"vertical-align: middle; padding-left: 11pt;\"><strong><span style=\"font-size: 10.0pt; color: #a80000;\">Part B <\/span><\/strong><span style=\"font-size: 10.0pt; color: black;\">of the test requires that the worker performs the work that is outside the normal course of the hiring entity\u2019s business, AND;<\/span><\/p>\n<p style=\"vertical-align: middle; padding-left: 11pt;\"><strong><span style=\"font-size: 10.0pt; color: #a80000;\">Part C<\/span><\/strong> <span style=\"font-size: 10.0pt; color: black;\">of the test requires that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.<\/span><\/p>\n<p style=\"vertical-align: middle;\"><span style=\"font-size: 10.0pt; color: black;\">Further, the California Supreme Court noted that under the right-of-control test, it\u2019s \u2018not how much control a hirer actually exercises, but how much control the hirer retains the right to exercise.\u2019<\/span><\/p>\n<p style=\"vertical-align: middle;\"><span style=\"font-size: 10.0pt; color: black;\">The outcome for Realtors<sup>\u00ae<\/sup> in California <\/span><span style=\"font-size: 10.0pt; color: black;\">was that, through the efforts of the California Realtor<sup>\u00ae<\/sup> and others, Realtors were not covered under the ABC test and were deemed to be ICs. We won\u2019t go into details as to how this was attained but, sufficient to say, it wasn\u2019t without a great deal of effort by the Realtor Association. The reasons for the effort to keep the ABC test from applying to real estate professionals is self-evident. To escape the application of the ABC test, the employing entity has to survive all three of the ABC tests. A plain reading of the ABC test and its application to real estate professionals seems to indicate that Realtor independent contractors may fail at least Part B and perhaps even Part A of the ABC test. <\/span><\/p>\n<p style=\"vertical-align: middle;\"><span style=\"font-size: 10.0pt; color: black;\">If the ABC test was applied on a national basis, there would be a dramatic reduction of the number of real estate professionals. Given the requirement to pay agents minimum wage and other benefits, brokerage firms would cut the number of agents they employ drastically.&nbsp;&nbsp; <\/span><span style=\"font-size: 10.0pt; color: black;\">&nbsp;<\/span><\/p>\n<p style=\"vertical-align: middle;\"><span style=\"font-size: 10.0pt; color: black;\">Whether this would be a good thing for our <\/span><span style=\"font-size: 10.0pt; color: black;\">industry or not\u2014fewer, more productive <\/span><span style=\"font-size: 10.0pt; color: black;\">full-time agents\u2014is not necessarily a bad <\/span><span style=\"font-size: 10.0pt; color: black;\">thing. It would change the nature of every<\/span><span style=\"font-size: 10.0pt; color: black;\">thing in our industry. In talking with <\/span><span style=\"font-size: 10.0pt; color: black;\">brokerage and Realtor<sup>\u00ae<\/sup> Association lead<\/span><span style=\"font-size: 10.0pt; color: black;\">ers, when this issue was first raised, they realized that the impact would be drastic.<\/span><\/p>\n<p style=\"vertical-align: middle;\"><span style=\"font-size: 10.0pt; color: black;\">Depending on whether this truly becomes <\/span><span style=\"font-size: 10.0pt; color: black;\">a national regulation or remains at the <\/span><span style=\"font-size: 10.0pt; color: black;\">state level, Realtor associations and indus<\/span><span style=\"font-size: 10.0pt; color: black;\">try leaders should be prepared to vigorous<\/span><span style=\"font-size: 10.0pt; color: black;\">ly engage in this issue to protect the ability for real estate professionals to remain ICs. We\u2019re not expert enough on the issue of whether the states would <\/span><span style=\"font-size: 10.0pt; color: black;\">retain the right to supervise this within <\/span><span style=\"font-size: 10.0pt; color: black;\">their own borders or whether, should it be <\/span><span style=\"font-size: 10.0pt; color: black;\">passed by the Congress and signed into law, it will be a national regulatory issue. <\/span><\/p>\n<h4 style=\"vertical-align: middle;\"><span style=\"font-size: 10.0pt; color: #d80000;\">The Joint Employer Issue<\/span><\/h4>\n<p style=\"vertical-align: middle;\"><span style=\"font-size: 10.0pt; color: black;\">In early 2020, the U.S. House of Representatives passed HR 2474, the Protecting the Right to Organize (PRO) Act. The bill was not taken up by the Senate.<\/span><\/p>\n<p style=\"vertical-align: middle;\"><span style=\"font-size: 10.0pt; color: black;\">&nbsp;<\/span><span style=\"font-size: 10.0pt; color: black;\">On page 14 of the Democratic Party Platform report, it states, \u201cDemocrats will prioritize the passing of the PRO Act and restoring worker\u2019s rights, including the right to launch secondary boycotts.\u2019<\/span><\/p>\n<p style=\"vertical-align: middle;\"><span style=\"font-size: 10.0pt; color: black;\">The PRO Act would make significant changes to the joint-employer standard under the National Labor Relations Board (NLRB). Joint-employer rules determine when two or more employers are jointly responsible for the same employees. Take, for example, the relationship between a real estate franchiser and its franchisees. A case filed with the NLRB in 2014-2015 referenced McDonalds, and others, as defendants in the action. Any franchiser-franchisee agreement could fall under a redefinition <\/span><span style=\"font-size: 10.0pt; color: black;\">of the joint-employer rule under the NLRB.<\/span><\/p>\n<p style=\"vertical-align: middle;\"><span style=\"font-size: 10.0pt; color: black;\">In 2015, the NLRB, under the previous administration, issued a decision in the Brown-Ferris (BFI) case that sought to drastically expand the coverage of what constitutes a joint-employer relationship. For example, prior to this decision, a company was a joint employer if it exercised <\/span><em><span style=\"font-size: 10.0pt; color: black;\">immediate and direct control <\/span><\/em><span style=\"font-size: 10.0pt; color: black;\">over the employ<\/span><span style=\"font-size: 10.0pt; color: black;\">ees of another company. Under the NLRB\u2019s new standard, it expanded joint <\/span><span style=\"font-size: 10.0pt; color: black;\">employment to situations where a company only had <\/span><em><span style=\"font-size: 10.0pt; color: black;\">indirect or potential control<\/span><\/em><span style=\"font-size: 10.0pt; color: black;\"> over a group of another company\u2019s employees. <\/span><span style=\"font-size: 10.0pt; color: black;\">&nbsp;<\/span><\/p>\n<p style=\"vertical-align: middle;\"><span style=\"font-size: 10.0pt; color: black;\">Depending on its scope, the joint-employer <\/span><span style=\"font-size: 10.0pt; color: black;\">standard can impact a variety of business-<\/span><span style=\"font-size: 10.0pt; color: black;\">to-business relationships, including contractors, subcontractors and franchisees, <\/span><span style=\"font-size: 10.0pt; color: black;\">according the American Action Forum (AAF), a conservative issues-focused business advocacy organization. According to the AAF, the new standard is so vague it could impact companies\u2019 ability to impose minimum standards and for franchisers to assist franchisees with a host of business issues without triggering possible joint employment liability. <\/span><span style=\"font-size: 10.0pt; color: black;\">&nbsp;<\/span><\/p>\n<p style=\"vertical-align: middle;\"><span style=\"font-size: 10.0pt; color: black;\">Imagine our industry\u2019s leading franchisers faced with either having to enforce employment standards on their franchisees or not having the ability to enforce service standards or minimum standards. The underlying foundation of how franchisers work with their franchisees may be fundamentally changed through actions by the NLRB under the proposed PRO Act.<\/span><span style=\"font-size: 10.0pt; color: black;\">&nbsp;<\/span><\/p>\n<p style=\"vertical-align: middle;\"><span style=\"font-size: 10.0pt; color: black;\">One other more minor part of the PRO Act would be to \u201crewrite the rules that have undermined worker\u2019s ability to advocate for themselves, <\/span><em><span style=\"font-size: 10.0pt; color: black;\">including non-<\/span><\/em><em><span style=\"font-size: 10.0pt; color: black;\">compete clauses, and no-poaching agreements.\u201d<\/span><\/em><span style=\"font-size: 10.0pt; color: black;\"> One can only imagine the impact on the merger and acquisition business when purchasers of brokerage firms no longer enforce non-solicitation agreements on the sellers. Not only would it kill brokerage firm valuations, but it would put a huge damper on any activity at all.<\/span><\/p>\n<p><span style=\"font-size: 10.0pt; color: black;\">Remember, none of this is national law or regulation today. Whether it becomes law will be a matter of the national elections in November.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Independent contractors and franchiser-franchisee business relationships face potential challenges ahead.<\/p>\n","protected":false},"author":15802,"featured_media":4822,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3255],"tags":[],"coauthors":[],"class_list":["post-236","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-archive"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v25.4 (Yoast SEO v26.8) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Comparing Republican and Democratic Platforms on Real Estate Industry Impacts<\/title>\n<meta name=\"description\" content=\"Comparing 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