Not Required Doesn’t Mean No Risk
In many U.S. states, real estate brokers are not legally required to provide workers’ compensation coverage for independent contractor licensees. Because there is no statutory mandate, many firms assume coverage is unnecessary.
From a risk and liability perspective, that assumption can create exposure. Workers’ compensation is not only a compliance mechanism. It is a structured system for managing injuries, medical costs, wage loss that can otherwise escalate into litigation, and reimbursement demands or misclassification disputes.
Industry-Specific Misclassification Litigation
A real estate–specific classification dispute in New Jersey illustrates how independent contractor status can become legally contested — and why firms may want to consider protective measures like workers’ compensation even where it is not mandated.
In a class action filed in 2019, a licensed real estate salesperson alleged that a brokerage had misclassified salespersons as independent contractors, asserting violations of New Jersey wage payment and employment laws. The case created significant uncertainty for the real estate industry because it challenged long-standing independent contractor models used by brokerages.
During the litigation, the New Jersey Legislature amended the Real Estate Brokers and Salespersons Act to clarify that when a written agreement exists treating a salesperson as an independent contractor, that classification would be recognized for purposes of state employment laws. The New Jersey Supreme Court upheld the legislative amendment, effectively resolving the dispute and preserving independent contractor status for real estate agents operating under qualifying agreements.
While the case did not arise from a workers’ compensation injury, it demonstrates a key risk reality: real estate independent contractor classification can be challenged, litigated and redefined through courts and legislation. When injuries occur during periods of legal uncertainty, firms without workers’ compensation coverage may face heightened exposure.
Independent Contractor Labels Are Not Determinative
Across jurisdictions, courts and regulators routinely look beyond contract language and examine the actual working relationship. Federal and state agencies apply multi-factor tests that evaluate control, economic dependence and integration into the business, rather than relying solely on how a worker is labeled³.
In real estate, real estate licensees often:
- Operate under brokerage branding
- Use brokerage systems and supervision
- Perform core revenue-generating activities
- Conduct fieldwork subject to brokerage policies
These factors are frequently cited in disputes over responsibility when injuries occur.
Injury Exposure Exists Regardless of Legal Classification
Real estate work involves routine physical and travel-related risks, including:
- Property showings
- Open houses
- Neighborhood canvassing
- Inspections and walkthroughs
- Driving between listings
When an injury occurs and no workers’ compensation policy exists, the exposure does not disappear. Instead, it may surface as a personal injury claim, reimbursement demand, or classification challenge. Workers’ compensation provides a defined, no-fault framework that can prevent escalation.
Workers’ Compensation as a Litigation Control Tool
One of the most practical benefits of workers’ compensation is its ability to limit disputes. In states where workers’ compensation applies, it often functions as the exclusive remedy for workplace injuries, reducing the likelihood of civil litigation.
Without coverage, injured workers may pursue claims through general liability policies or direct lawsuits, where defense costs and outcomes are less predictable.
Operational and Insurance Considerations
Voluntary workers’ compensation coverage can also support broader risk management objectives:
- Demonstrates structured risk controls to insurers
- Reduces claim spillover into E&O or general liability policies
- Supports continuity of operations after an injury
- Provides clarity to licensees regarding injury response
Underwriters often view proactive risk management favorably when evaluating a firm’s overall exposure.
Cost Versus Exposure
Workers’ compensation benefits are statutory, and premiums are driven by compensation classifications. Many firms underestimate the affordability of coverage compared to the potential cost of a single uncovered injury or dispute.
In non-mandatory states, the decision to carry workers’ compensation is less about legal obligation and more about financial predictability.
How CRES Insurance Helps
CRES works with real estate firms nationwide to evaluate workers’ compensation exposure, classification risk and optional coverage strategies. By understanding how brokerages operate and how classification disputes arise, CRES helps firms make informed decisions about whether workers’ compensation coverage is appropriate for their business model and risk profile.
The objective is compliance where required and risk mitigation where exposure exists.
Learn more about CRES real estate errors & omissions insurance.
