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LA County Superior Court Case Could Have Wide Spread Consequences

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A case is pending in Los Angeles County Superior Court that could have wide-spread consequences for the conduct of real estate brokerage business in California and, possibly, the rest of the country.

It has to do with the classification of real estate agents as independent contractors rather than as employees.

Bararsani v. Coldwell Banker Residential Brokerage Company. On November 15, 2012, plaintiff Ali Bararsani filed a putative class action complaint in Los Angeles Superior Court, California, against Coldwell Banker Residential Brokerage Company (“CBRBC”) alleging that CBRBC had misclassified current and former affiliated sales associates as independent contractors when they were actually employees.

The complaint, as amended, further alleges that, because of the misclassification, CBRBC has violated several sections of the California Labor Code including Section 2802 for failing to reimburse plaintiff and the purported class for business related expenses and Section 226 for failing to keep proper records.

The amended complaint also asserts a Section 17200 Unfair Business Practices claim for misclassifying the sales associates. The Plaintiff, on behalf of a purported class, seeks the benefit of the California labor laws for expenses, wages and other sums, plus asserted penalties, attorneys’ fees and interest.

The Company is involved in claims, legal proceedings and governmental inquiries related to alleged contract disputes, business practices, intellectual property and other commercial, employment, regulatory and tax matters.

Examples of such matters include but are not limited to allegations:

~ that the Company is vicariously liable for the acts of franchisees under theories of actual or apparent agency;

~ by former franchisees that franchise agreements were breached including improper terminations;

~ that residential real estate sales associates engaged by NRT—in certain states—are potentially employees instead of independent contractors, and therefore may bring claims against NRT for breach of contract, wrongful discharge and negligent supervision and obtain benefits, indemnification and expense reimbursement available to employees;

~ concerning claims for alleged RESPA or state real estate law violations including but not limited to claims challenging the validity of sales associates indemnification and administrative fees;

~ concerning claims generally against the company owned brokerage operations for negligence or breach of fiduciary duty in connection with the performance of real estate brokerage or other professional services; and

~ concerning claims generally against the title company contending that, as the escrow company, the company knew or should have known that a transaction was fraudulent or concerning other title defects or settlement errors.

The case raises significant classification claims that potentially apply to the real estate industry in general and for which there is no California case authority.

Given the early stage of this case, the novel claims presented and the great uncertainties regarding which sales associates, if any, may be part of a class, if one is certified, they cannot estimate a range of reasonably potential losses for this litigation.

CBRBC believes it operates in a manner consistent with widespread industry practice for many decades.

There is a saying: "Real Estate Brokers are happiest when keeping 50% of the buyer's/seller's agents commissions." Before committing to an employment contract with a real estate brokerage have their independent contractors agreement reviewed by an attorney and blue pencil conditions viewed unreasonable. It will be interesting to see how this case plays out in court

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