The independent contractor test was thoroughly analyzed by the Supreme Court in Re/Max v. Wausau Ins. Cos., 162 N.J. 282 (2000). In that case Re/Max argued that all of its real estate agents were independent contractors. They signed agreements to that effect. While most of the real estate agents worked full time, they did not have to spend any particular amount of time in the office. They chose their own hours of work. They furnished their own vehicles and controlled their own advertising (although the Re/Max logo had to be included in advertising). Re/Max advertised that agents are “in business for yourself but not by yourself.” Re/Max allowed its agents to retain the entire sales commission earned from any sale, but the agents had to pay to the broker certain fees and expenses, including a security deposit, an initiation fee, and a monthly management fee for use of the office.
The Supreme Court held that under both the control test and the relative nature of the work test, the real estate agents were employees. On the control test, the court noted that agents had to comply with many guidelines and quality controls. Further, real estate agents are an integral part of the business activity of the company. Sales agents are economically dependent upon Re/Max because the broker provides the listings, the office, the equipment, and the support staff. Agents also work exclusively for Re/Max. Thus, the Supreme Court used the test of functional integration or economic dependence in order to invalidate the argument that the agents were independent contractors. “We hold that the innovative structure created by the Re/Max agreement is simply another sophisticated attempt to thwart the employer-employee relationship. . . .” Id. at 288.
