LESSON 9: EMPLOYMENT ISSUES Flashcards
What must a broker do to assure the IRS of the independent contractor relationship?
The broker needs to ensure that the Independent Contractor Agreement is signed when a new agent joins, and a Statement of Understanding is signed annually.
What is the Statement of Understanding for?
It outlines the major differences between how a broker treats an independent contractor vs an employee, and is signed annually by the agent.
What expenses must an independent contractor pay?
The independent contractor must pay for license fees, membership dues, automobile expenses, entertainment, taxes, and have no salary or sick pay.
What tax responsibilities does an independent contractor have?
Independent contractors must pay their own income and FICA taxes and pay income tax quarterly based on projected income.
What is the IRS “twenty-factor” test for determining an independent contractor?
It’s a set of factors used by the IRS to determine whether a person is an independent contractor, though no single test is definitive.
What is the primary consideration when determining if someone is an independent contractor?
It is based on how much control the broker has over the agent, such as required hours or work specifics.
What can happen if a broker exercises too much control over independent contractors?
The IRS may classify the agents as employees rather than independent contractors, which could require employment laws to apply.
What is the potential issue if a broker hires agents but exercises control over them?
The IRS could classify the agents as employees if the broker has too much control over their work, violating independent contractor status.
Which of the following is NOT a duty a principal owes an agent?
Availability
What weighs the heaviest when determining if someone is an independent contractor according to the IRS?
The degree of control the broker has over the agent’s work, such as required hours or job specifics.
What are the key differences between an independent contractor and an employee?
Independent contractors are not subject to the broker’s control over their schedule or work specifics, and are paid on a commission basis, not salary.
How does the IRS view a worker required to comply with instructions on when, where, and how to work?
The worker is typically considered an employee if they must comply with such instructions.
What does training a worker or requiring them to attend meetings indicate?
It typically indicates that the worker is an employee.
How does the integration of a worker’s services into business operations affect classification?
If the worker’s services are integral to the business, it usually indicates they are an employee.
What does requiring a worker to render services personally suggest?
It suggests that the worker is an employee since the employer cares about how the service is accomplished, not just the result.
What does supervising and paying assistants for a worker indicate?
It indicates that the worker is an employee since the employer has control over the worker’s job.
What does a continuing relationship with a worker, even at irregular intervals, suggest?
It suggests an employer-employee relationship.
What does setting specific hours of work for a worker suggest?
It suggests the worker is an employee, as the employer has control over their schedule.
What does working full-time for one employer suggest about the worker?
It suggests that the worker is an employee, as they are not free to work for other employers.
What does working on an employer’s premises suggest?
It suggests that the worker is an employee, as it indicates control over the worker.
What is indicated by a worker being required to submit regular reports to the employer?
It indicates that the worker is likely an employee.
How does payment by commission affect worker classification?
Payment by commission suggests the worker is an independent contractor.
What does an employer paying for a worker’s business expenses suggest?
It suggests that the worker is an employee, as the employer is covering business-related costs.
What does furnishing significant tools or equipment to a worker suggest?
It suggests that the worker is an employee, as it indicates control over the worker’s job.
What does a worker significantly investing in their own facilities suggest?
It suggests that the worker is an independent contractor, as they maintain their own workspace.
What does it mean for a worker to realize a profit or loss from their services?
It generally suggests that the worker is an independent contractor.
What does working for multiple firms at once indicate?
It suggests that the worker is an independent contractor, as they are free to work for various companies.
What does making services available to the general public indicate?
It suggests that the worker is an independent contractor, as they offer services to the public consistently.
What does an employer’s right to discharge a worker suggest?
It suggests that the worker is an employee, as the employer can terminate their relationship for failure to comply.
What does a worker’s right to terminate their relationship with an employer without liability suggest?
It suggests that the worker is an independent contractor.
What is an exception to the rule regarding employer liability for independent contractors?
The employer may be held liable if they are negligent in hiring the independent contractor or if they give negligent orders. For example, hiring an unlicensed contractor or giving vague instructions that lead to damage.
What protection does an independent contractor lack?
Independent contractors do not have the protections of collective bargaining, minimum wage laws, pension plans, health benefits, sick and vacation pay, or insurance.
What are some benefits to the employer of using independent contractors?
Lower overall cost, easier replacement, less expensive to discharge, higher quality product, and no training required.
What are some benefits to independent contractors?
Flexible work locations and times, control over amounts charged for work, flexible clothing choices, no union requirement, and the choice of who to work for.
Under what conditions can service performed by an individual as a real estate broker or salesperson be considered independent contracting?
Service is independent contracting if the individual is licensed by the Texas Real Estate Commission, paid based on sales/output, and works under a written contract stating they are not treated as an employee for federal tax purposes.
Under what conditions can service performed by an individual as a real estate instructor be considered independent contracting?
The individual must be instructing in an approved program, and the service is performed under a written contract stating the individual is not treated as an employee for federal tax purposes.
What are the three categories of facts that provide evidence for determining control in a worker’s relationship?
Behavioral (control over what and how work is done), Financial (who controls business aspects like pay, expenses, and tools), and Type of Relationship (contracts, benefits, and work continuity).
What should businesses consider when determining if a worker is an employee or independent contractor?
Businesses should weigh all factors, including control over work, the degree of independence, and document the factors used in making the determination. There is no set number of factors.
What is IRS Form SS-8 used for?
IRS Form SS-8 is used to request a determination of a worker’s status (employee or independent contractor) from the IRS.
What are the consequences of misclassifying an employee as an independent contractor?
The business may be held liable for employment taxes for the worker if there is no reasonable basis for treating them as an independent contractor.
What is the Voluntary Classification Settlement Program (VCSP)?
The VCSP is a program that allows taxpayers to reclassify workers as employees for future tax periods with partial relief from federal employment taxes.
How does the Affordable Care Act (ACA) treat real estate agents differently from other employees?
The ACA recognizes that real estate agents classified as “qualified real estate agents” under IRS rules are considered non-employees for ACA purposes and are exempt from the employer’s health care coverage requirement.
What does the principle of “respondeat superior” establish in employee liability?
It holds the employer liable for the acts of the employee committed during the course of employment, even if the act happens outside the place of employment, as long as it relates to the employment.
What is the test for determining if an employee’s activity is within the scope of employment?
Courts are flexible, and even if the activity is not directly related to work, the employer may still be held liable if the act was performed on their behalf.
When can an employer be held liable for an employee’s criminal acts?
An employer may be held liable if the employee’s criminal act was committed on behalf of the employer, such as when the employee was performing a task related to their job at the time.
What items count as earnings for Social Security purposes for a real estate broker?
Earnings from buying, selling, and renting properties for others, and income from the sale or rental of properties owned by the broker until a buyer is found.
What is considered self-employment income for Social Security?
If a person operates a trade, business, or profession alone or as a partner and earns $400 or more, they must report their income for Social Security taxes on Schedule SE.
What Are “Net Earnings”?
Net earnings for Social Security are your gross earnings from your trade or business, minus your allowable business deductions and depreciation. Some income does not count as earnings for Social Security. When calculating your net earnings, do not include: - Dividends from stocks and interest on bonds, unless you’re a dealer in stocks and securities. - Interest from loans, unless your business is lending money. - Rentals from real estate, unless you’re a real estate dealer or regularly provide services for the occupant’s convenience. - Income from a limited partnership.
Are Real Estate Agents Self-Employed?
Effective January 1, 1983, certain qualified real estate agents are treated as self-employed. To be considered self-employed, you must: 1. Be a licensed real estate sales agent. 2. Receive substantially all payments for services based on sales or other output, rather than hours worked. 3. Perform services under a written contract stating you won’t be treated as an employee for federal tax purposes. Self-employed individuals must file annual returns and pay self-employment tax, which includes Social Security and Medicare taxes.
What Is the Fair Labor Standards Act (FLSA)?
The FLSA, passed in 1938, deals with work hours, minimum wage, overtime, and child labor. It has been amended several times and expanded to include laws like the Age Discrimination in Employment Act (1967) and Migrant Worker Protection Act (1983). It guarantees a minimum wage, overtime pay, and sets regulations for child labor.
What Is the Equal Employment Opportunity Commission (EEOC)?
The EEOC enforces federal laws against workplace discrimination based on race, color, religion, sex, national origin, age, disability, and genetic information. It investigates discrimination charges, attempts mediation, and litigates cases. Employers must comply to avoid conflicts with the EEOC.
What Are Federal Laws Prohibiting Job Discrimination?
The following laws prohibit discrimination: - Title VII of the Civil Rights Act of 1964: Race, color, religion, sex, or national origin. - Equal Pay Act of 1963: Sex-based wage discrimination. - Age Discrimination in Employment Act of 1967: Protects individuals 40 and older. - Americans with Disabilities Act of 1990: Disability-based discrimination. - Genetic Information Nondiscrimination Act of 2008: Discrimination based on genetic information.
What Are Discriminatory Practices Under These Laws?
Discriminatory practices include: - Discrimination in hiring, firing, compensation, job ads, and more. - Harassment based on race, color, religion, sex, national origin, disability, genetic information, or age. - Retaliation for filing a discrimination charge. - Employment decisions based on stereotypes or assumptions.
What Is National Origin Discrimination?
National origin discrimination is illegal if it is based on an individual’s birthplace, ancestry, culture, or linguistic traits. Employers may only require English in the workplace if it’s necessary for business.
What Is Religious Accommodation in the Workplace?
Employers must reasonably accommodate employees’ religious beliefs unless doing so would cause undue hardship.
What Is Sex Discrimination Under Title VII?
Title VII prohibits sex discrimination, including: - Sexual harassment (hostile environment or quid pro quo). - Pregnancy-based discrimination, which requires that pregnancy and related conditions are treated like other temporary illnesses or conditions.
What does the Age Discrimination in Employment Act prohibit in job notices or advertisements?
It prohibits statements or specifications of age preference and limitations unless age is a bona fide occupational qualification (BFOQ).
Does the Age Discrimination in Employment Act allow discrimination in apprenticeship programs?
No, it prohibits discrimination on the basis of age in apprenticeship programs, including joint labor-management apprenticeship programs.
Can employers reduce benefits based on age under the Age Discrimination in Employment Act?
Employers can reduce benefits based on age only if the cost of providing the reduced benefits to older workers is the same as the cost of providing benefits to younger workers.
What does the Equal Pay Act prohibit?
The Equal Pay Act prohibits discrimination based on sex in the payment of wages or benefits for similar work under similar conditions.
Can employers reduce wages to equalize pay between men and women under the Equal Pay Act?
No, employers may not reduce wages of either sex to equalize pay.
What constitutes a violation of the Equal Pay Act?
A violation can occur if a different wage is paid to a person who worked in the same job before or after an employee of the opposite sex, or if a labor union causes the employer to violate the law.
How is an individual with a disability defined under the ADA?
An individual with a disability is someone with a physical or mental impairment that substantially limits major life activities, has a record of such an impairment, or is regarded as having a disability.
What are considered major life activities under the ADA?
Major life activities include walking, breathing, seeing, hearing, speaking, learning, thinking, eating, and functions of major bodily systems.
What does “qualified” mean under the ADA for individuals with disabilities?
A “qualified” individual satisfies job requirements and can perform essential job functions with or without reasonable accommodation.
What does reasonable accommodation include under the ADA?
Reasonable accommodation may include job restructuring, modifying work schedules, providing additional leave, reassignment, acquiring equipment, adjusting policies, etc.
Is an employer required to provide a reasonable accommodation if it causes undue hardship?
No, an employer is not required to provide an accommodation if it imposes significant difficulty or expense considering the business’ size, resources, and operations.
Can an employer ask about a job applicant’s disability before making an offer?
No, employers cannot ask about the existence, nature, or severity of a disability before an offer. They may only ask about the ability to perform job functions.
Does the ADA protect employees who are currently engaging in illegal drug use?
No, the ADA does not protect employees or applicants who are currently engaging in illegal drug use.
What is the Civil Rights Act of 1991?
The Civil Rights Act of 1991 made major changes to federal laws against employment discrimination, allowing compensatory and punitive damages in cases of intentional discrimination, and adding protections like jury trials and attorneys’ fees.
What does Title II of the Genetic Information Nondiscrimination Act (GINA) prohibit?
Title II of GINA prohibits discrimination based on genetic information, including the use of such information in employment decisions and mandates confidentiality of genetic information.
What does the Family and Medical Leave Act (FMLA) entitle employees to?
The FMLA entitles eligible employees to take up to 12 workweeks of unpaid, job-protected leave for family and medical reasons with continued health insurance coverage.
What are the 12 reasons for which an employee can take FMLA leave?
Birth or care of a newborn, adoption or foster care, care for a spouse/child/parent with a serious health condition, personal serious health condition, qualifying exigency due to military service, or military caregiver leave.
What does the Americans With Disabilities Act (ADA) protect against?
The ADA protects individuals with disabilities from discrimination in employment, public transportation, public accommodations, commercial facilities, and telecommunications.
What does the ADA require in terms of accessibility in multifamily dwellings?
The ADA requires public and common areas to be accessible, doorways wide enough for wheelchairs, and bathrooms/kitchens accessible for wheelchair users.
What is the doctrine of Employment at Will?
Employment at Will is a common law principle where employers can hire or fire employees at their discretion, but not for illegal reasons such as discrimination.
How must compensation agreements in real estate be documented?
Compensation agreements must be in writing to be enforceable in Texas, as per Texas Occupations Code 51101.806.
What happens if a sales agent fails to provide a Notice to Buyer Regarding Abstract or Title Policy?
The sales agent may not receive payment of or recover any commission agreed upon for the sale.
What does the agreement for compensation not include?
The agreement for compensation is not part of the purchase and sale agreement; it must be documented separately in a listing or buyer representation agreement.
Can a broker use the term “team” or “group” in their business name?
Yes, TREC rules do not prohibit a broker from using “team” or “group” in their licensed or assumed business name.
What happens if a broker appoints agents to represent both the buyer and the seller?
Appointed agents can offer advice and opinions to their respective parties, providing higher service levels. If no appointments are made, the broker or agent cannot favor either party.
Can an associate broker refer to themselves as a broker in an advertisement?
No, an associate broker cannot refer to themselves as a broker in an advertisement, as this could mislead the public about their role in the brokerage.
Who is eligible to earn a commission in real estate transactions?
Only licensed real estate agents or brokers can earn or receive a commission, including corporate entities licensed by TREC.
Can a real estate broker from another state earn a commission in Texas?
Yes, if the out-of-state broker is licensed and does not conduct negotiations in Texas, they can earn a commission.
What must a foreign broker do to receive compensation in Texas?
A foreign broker must comply with the laws of their country or territory and cannot conduct negotiations in Texas to be compensated.
