California Real Estate Practice Exam

What determines whether a real estate salesperson has been correctly classified as an independent contractor?

1. The number of hours they work

2. Whether they are paid a salary or commission

3. The level of control the broker has over their activities

4. The designation in their contract

The correct answer is: The level of control the broker has over their activities

The classification of a real estate salesperson as an independent contractor is fundamentally influenced by the level of control exercised by the broker over the salesperson's activities. In defining independent contractor status, the key factor is the degree to which one party has control over how another party performs their work. If a broker controls the details of how and when the salesperson conducts their work, the relationship leans towards that of an employee rather than an independent contractor. In contrast, if the salesperson can set their own schedule, determine their methods of conducting business, and exercise overall discretion in how they operate, they are more likely to be classified as an independent contractor. Factors such as whether they are paid a salary or commission are relevant but not definitive on their own; similarly, the number of hours worked or wording in a contract might not adequately reflect the true nature of the working relationship. Ultimately, it is the broker's level of control that serves as the determining criteria for classification.