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LEGAL UPDATES

Overseeing a New Real Estate Licensee in Your California Brokerage

Having a new licensed real estate agent is exciting, yet challenging for the broker of record and the new licensee.

Standard protocol for a new real estate licensee by any brokerage includes:

1. Verify that the new real estate licensee is a licensed California agent in good standing. Once done, save electronically as well as print the DRE information and save in the licensee’s file with the brokerage.

2. Prepare DRE form RE 214 4/21 Rev, have it dated and signed by the former broker of record, new broker of record and licensee, and file it with the DRE, saving a filed copy for future needs.

3. Have the affiliated licensee date and sign an independent contractor’s agreement with your brokerage setting forth the terms of the affiliation and real estate commission splits. (C.A.R. form ICA-NA 4/15).

4. Place your new affiliated licensee on the brokerage’s worker’s compensation policy as mandated by California Department of Real Estate. California requires real estate brokers to provide workers’ compensation coverage for their real estate sales agents. If an agent of an uninsured broker is injured and cannot collect the workers’ compensation benefits to which they are entitled through the broker’s policy, the agent receives benefits from the Uninsured Employers Fund (UEF). The UEF would, in turn, make every attempt to collect from the broker. A brokerage could be assessed up to $100,000 in penalties for not having a worker’s compensation policy in effect for all of its affiliated real estate licensees and employees. All uninsured real estate brokerages should immediately obtain worker’s compensation coverage through a California recognized self-insurance program or through an insurance carrier recognized by California’s Department of Insurance. California Business & Professions Code section 10032 (b)states:“A real estate broker and a real estate salesperson licensed under that broker may contract between themselves as independent contractors or an employer and employee, for purposes of their legal relationship with and obligations to each other. Characterization of a relationship as either ‘employer and employee’ or ‘independent contractor’ for statutory purposes, including, but not limited to, withholding taxes on wages and for purposes of unemployment compensation, shall be governed by section 650 and Sections  13000 to 13054, inclusive, of the Unemployment Insurance Code. For purposes of workers compensation the characterization of the relationship shall be governed by Section 3200, and following, of the Labor Code.”

5. Go over the brokerage’s manual as to protocol and conduct in person with the affiliated licensee. Give the licensee a copy for future reference and have the licensee sign and date a receipt for the brokerage’s manual to be placed in the affiliated licensee’s file for future reference. If the brokerage does not have a manual in place as to protocol and conduct, one should be created from a risk management perspective.

6. Have a weekly face to face meeting with the affiliated licensee to go over office protocol, listings, pending escrows, questions and other issues. Take notes and send an informational email to the new affiliated licensee to assist the licensee in his or her development as a member of the brokerage. Save all emails in the licensee’s affiliation file for future need.

Do the above for at least three (3) months on a weekly basis. Thereafter, have monthly face to face meetings with the affiliated licensee.

To help summarize key risk management points for your licensees, see all of our ClaimPrevent® Summaries:

And be sure your real estate brokerage has California real estate errors and omissions insurance to protect your employees, your agents, and your business.


By: Edward McCutchan
Sunderland | McCutchan, LLP
1083 Vine Street Ste. 907
Healdsburg, CA 95448

(707) 433-0377

emccutchan@sunmclaw.com  © 2023

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