Sticha v. Brandl/Anderson Homes, Inc.

Background

Curt Sticha worked as a salesperson selling Brandl/Anderson Homes, Inc. (BAH) homes beginning in 2003. His duties included working in model homes during specified periods, completing sales reports, collecting information from prospective buyers, maintaining company signs, and attending sales meetings. BAH classified him as an employee for his first eight years. During that period, his real estate license was held by Value Realty, a brokerage owned by BAH.

In 2011, BAH moved its salespeople’s licenses to Edina Realty and told Sticha that he was an independent contractor. Sticha understood that he would no longer receive a W-2 tax form and would instead receive a 1099 form. He continued to be paid on commission but no longer received benefits, retirement-plan contributions, or fuel and cellphone reimbursement. Edina Realty acted as the broker for BAH homes and paid commissions directly to Sticha, who sold only BAH homes.

In 2019, Sticha moved his license from Edina Realty to Prandium Group Real Estate, LLC. He signed an agreement expressly stating that he was an independent contractor, responsible for his own tax withholdings. His work otherwise remained the same: he continued selling only BAH homes, and Prandium paid his commissions directly. BAH ended its relationship with Sticha on September 8, 2020, but allowed him to close pending purchase agreements and paid the related commissions after the sales closed. In March 2021, Sticha also signed a document stating that he had not been a BAH employee since 2011 and that his relationship with BAH was as a listing agent through Prandium and previously Edina Realty.

Sticha filed the case in state court, asserting claims under Minnesota wage-protection laws, the Fair Labor Standards Act and its Minnesota counterpart, unjust enrichment, and the Minnesota Uniform Deceptive Trade Practices Act. He sought damages and declaratory relief. BAH removed the case to federal court and moved for summary judgment.

Issue

The dispositive issue was whether Sticha was properly classified as an independent contractor after 2011. The parties and court agreed that, if he was properly classified, none of his claims could proceed.

Court’s analysis

The court applied Minnesota Administrative Rule 5224.0230, Subpart 2, which addresses the classification of real estate and securities salespeople. Under the rule, a real estate salesperson who is a qualified real estate agent under section 3508(b)(1) of the Internal Revenue Code is an independent contractor. The federal provision requires that the salesperson be licensed, be paid for sales rather than hours worked, and perform services under a contract stating that the person will not be treated as an employee for federal tax purposes.

Sticha conceded that he was a licensed real estate agent. The court held that his commission-based compensation satisfied the requirement that he be paid for real estate sales rather than hours worked. The court rejected his argument that a factual dispute existed because he was paid after completed home sales, explaining that commissions based on completed sales are compensation tied to sales, not logged hours.

The court also held that the contractual requirement was satisfied. Sticha had a contract with Prandium plainly identifying him as an independent contractor for tax purposes. The record showed that he worked for and was paid directly by Prandium, which had listing agreements with BAH. Sticha had no written contract with BAH. The court concluded that BAH’s requirements concerning tasks involved in selling its homes did not make Sticha a BAH employee.

The court did not address whether Sticha substantially met all conditions in the second clause of Minnesota Administrative Rule 5224.0230, Subpart 2, because it found the first clause dispositive. It also disregarded Sticha’s affidavit to the extent it was conclusory and self-serving and unsupported by additional facts. The court stated that, even if it considered the affidavit, the undisputed facts would lead to the same result.

Disposition

The court granted BAH’s motion for summary judgment and dismissed the case. The order did not state that the dismissal was with or without prejudice.