State targets realty brokers
Biggest firms face fines for not buying workers' comp insurance for their agents.
By Andrew LePage -- Bee Staff Writer
Published 2:15 am PDT Saturday, June 19, 2004
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The state labor agency is poised to cite a "sizable percentage" of California's 20 largest residential real estate brokerages for failing to buy workers' compensation insurance for their sales agents.
Assuming that the targeted brokers don't prevail on an initial appeal, the state could fine them $1,000 per agent and shut them down, sidelining all their sales agents until they can secure the insurance, which can take weeks.
Jose Millan, deputy secretary for enforcement at the Labor and Workforce Development Agency, said the brokers either have no workers' compensation coverage for agents or have inadequate coverage. He declined to be more specific and would not name the brokers that will receive citations soon.
It is unlikely that any capital region brokerages are large enough to rank in the top 20 statewide, as based on number of employees.
Tipped off that some real estate brokers were shirking their responsibility, state labor officials warned early last month that after June 15 they would begin issuing stop-work orders and levy fines up to $100,000 against brokers without workers' compensation insurance to cover sales agents.
The labor agency has compared a list of state-licensed real estate brokers to one from the Workers' Compensation Insurance Rating Bureau of California to identify those who lack workers' compensation coverage or have inadequate coverage.
"They've got to understand this is not something we can ignore. We have to enforce the law, and if they're not happy with the law, they should seek to change it," Millan said.
Brokers have 10 days to either appeal a citation to the director of the state Department of Industrial Relations or to obtain insurance, Millan said. For larger employers, the insurance can cost hundreds of thousands of dollars a year.
Any broker who doesn't prevail on appeal will be issued a stop-work order and must cease all business until the insurance is obtained, Millan said. A fine of $1,000 per agent, not to exceed $100,000 per company, is effective the day the citation is issued, he added.
The state labor agency will cite brokers with no policy, while it will be up to the state Department of Insurance to investigate cases where brokers appear to have inadequate coverage, said Millan, who referred to the latter cases as "fraud."
Though many real estate brokers consider their sales agents independent contractors, labor officials insist that state law considers agents as employees for the purpose of workers' compensation insurance.
In a recent bulletin urging its members to make sure they have workers' compensation insurance, the California Association of Realtors stated that it has "always recommended that brokers carry workers' compensation insurance even though some older (court) cases indicate that it may not be necessary under some circumstances."
Millan said his agency had planned initially to check to see whether any of the state's top 50 brokerages were operating without insurance but decided to stop at 20 because there were so many violations within that first group.
"We're stopping here (to investigate those identified so far), and then we'll march on," Millan said
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