Brokers Must Have Workers’ Comp Insurance


A Reminder to All Brokers, If You Have Agents You Must Have Workers' Comp Insurance

By: Adam Matheny

Many real estate brokers are unaware of the laws that require them to provide their agents with workers’ compensation insurance or they just chose to ignore them. Why? It seems that there are over 23,000 brokers who currently have one or more agents (both real estate agents and their associate brokers) are under the mistaken impression that they are not employees because they are independent contractors working for them under an IC agreement.

What the Law Says About This

According to the law, entering into an IC agreement between the employing agencies, the agents or the associate brokers is only done for tax purposes. According to U.S. labor laws, any licensee who enters into an IC agreement becomes an employee of the agency hiring them. If they are to be considered employees, then the broker who is employing them is required under the same laws to provide them with workers’ comp insurance. All of this is covered under California Labor Code §2750.5.

As a broker, your list of employees might include:

  • Licensed sales agents
  • Broker associates working under your license
  • Licensed and unlicensed support and administrative staff

What if You Don’t Comply?

All of this begs the question, what happens to a broker who fails to carry the appropriate workers’ comp insurance or requires their employees to pay for their own insurance? As a broker, you could face a number of penalties, including:

  • A cease and desist order from the DLSE (Division of Labor Standards Enforcement) operating under the DIR (California Department of Industrial Relations). This effectively stops you from conducting business until you can provide the agency with proof of purchase.
  • Civil fines and penalties that can add up to $100,000.
  • Being required to reimburse both your current and any former agents for all the premiums they have paid for their workers’ compensation insurance. You could also be forced to pay for any policies such as business, vehicle, and professional liability or errors & omissions insurance.

There Are Exclusions Allowed Under Workers' Comp Laws

Like most laws, even there are exceptions built into Workers’ Compensation Laws. Among these are:

  • Brokers who own their business
  • Corporate officers and members of the board of directors

In other words, if you are the owner of your brokerage firm and it is a sole-proprietorship, you are not required to purchase workers’ compensation insurance for yourself. Why? Quite simply, you are considered a self-employed owner, not an employee.

If ownership of the brokerage firm is split between you and members of your immediate family (spouse, children, parents, siblings), you are not required to provide them with workers’ comp insurance. However, each person must be appropriately identified as a part owner, an officer, or a general partner.

If the above-listed persons are not co-owners however, but are instead employed by the broker, they must be covered by workers comp insurance just as you would any other employee. At the same time, if any of the directors act as agents for the brokerage firm, then they must be covered. Trying to determine who must be covered by workers’ compensation insurance can be confusing. If you have any questions, you should always consult with an attorney.


Partner With The Best

Flow Insurance Services knows workers compensation insurance, and we know it well. Place your trust in us and let us help you to write more business. When it comes to growing your business, things can be challenging. Flow is here to help!

Would You Like To Access Our Programs?