Reclassifying Appraisers as Employees

Peter Christensen

Peter Christensen

General Counsel - Attorney at LIA Administrators & Insurance Services
A graduate of the University of California, Berkeley’s Boalt Hall School of Law, he has been an attorney since 1993 and maintains the blog at Valuation Education. LIA has been offering E&0 insurance and loss prevention information to the appraisal profession nationally since 1972.
Peter Christensen

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Appraisers Classified as Independent Contractors Treated as EmployeesClassifying Appraisers as Independent Contractors – an Issue for Appraisal Firms and Maybe AMCs Too

A hot legal issue that is beginning to more often affect appraisal firms and similar businesses, such as inspection and field service management firms, is the classification of workers as independent contractors, rather than as employees.

In some lawsuits, plaintiff workers argue that they were improperly classified by firms as independent contractors and then claim that, if they had been treated properly as employees, they would have been entitled to compensation for overtime, as well as reimbursement for expenses. In other situations, the issue is a governmental audit for unpaid taxes or disability/unemployment contributions.

I have addressed this subject for appraisal firms in a recent article that appeared in the Appraisal Institute’s Valuation magazine. The article entitled “Independent Minded” is available digitally at this link.

In the article, I’ve summarized a case that should be considered by any companies engaged in “vendor management.” The result of the case was the re-classification of scores of “workers” (some of the workers were individuals but others had incorporated their own businesses) who worked as independent contractors to a nationwide field services management company. What happened in the case?

After four years of litigation, the federal court ruled on summary judgment that any California field service vendor to the defendant company who derived more than 70% of his or her income from the company should be classified as an employee and was thus entitled to overtime and reimbursement of expenses. The essential reasoning was that the company had the right to so closely control the work of its contractors (and also exercised that right) and the contractors were so dependent on the company that the contractors were employees under California law.

With liability established, the issue was then how much did the company owe its reclassified contractors? Last summer, the damages claimed by the named plaintiff and 10 class members went to trial. The jury awarded over $2 million just to those 11 individuals for unpaid overtime, unpaid expenses, penalties and interest. The award to the named plaintiff was a striking example: the jury determined that he worked 4,845 hours of overtime from 2010 through 2016 for which he should recover $98,615 in overtime payments (on top of the payments he actually received for doing the work) and that he should be awarded $168,746 for his unpaid expenses ($95,247 for mileage alone). It’s estimated that there are 150-200 remaining class members potentially entitled to the same types of damages – the total liability to the reclassified independent contractors could be $10-$20 million.

Appraisal management companies may want to read the case closely because, although the defendant company was engaged in field service management, the fact pattern is very close to some AMC operations. The evidence in the case included:

  • As part of being approved for the company’s panel, vendors panelists signed an agreement which, although referring to vendors as independent contractors, set forth detailed requirements for accepting assignments, scheduling property access, timely performance, photo requirements, status updating and quality control.
  • Panelists were not given a meaningful opportunity to negotiate the agreement.
  • Panelists also authorized the company to perform background checks.
  • The company offered assignments to panelists through its proprietary software platform and panelists were required to use this platform to upload their status reports, photos and invoices.
  • Panelists were required to respond to assignment requests within 24 hours and complete assignments within a stated time period, sometimes just three days.
  • Declining too many assignments or cherry picking the best could result in fewer assignments being offered.
  • The company “score carded” panelists on their acceptance/declination of assignments, status communications, timeliness of completion and quality.  A low rating could result in a warning, reduction of work or ineligibility.
  • The company tracked its panelists’ performance and recorded warnings, counseling and eligibility suspensions in “vendor profiles.”

The case is entitled Bowerman v. Field Asset Services, LLC (U.S. District Court, N.D. Cal., 2013).

Image credit flickr - Josh Tasman
Peter Christensen

Peter Christensen

A graduate of the University of California, Berkeley’s Boalt Hall School of Law, he has been an attorney since 1993 and maintains the blog at Valuation Education. LIA has been offering E&0 insurance and loss prevention information to the appraisal profession nationally since 1972.

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13 Responses

  1. Xpert says:

    The AMCs’ appraisal services agreements I have read so far stifle the appraiser’s independence, some violate state and federal law, and place incredible liability on appraiser’s shoulders.

    We’ve seen agreements seeking to control the behavior, attire, payment, and actions of the appraiser in a manner similar to an employee. Appraisers are independent contractors but lately I’ve seen AMCs like ServiceLink, Solidifi and Corelogic announce that they are/will be taking over scheduling. Solifi calls it Enhanced Inspection Scheduling where preferred times are offered to consumers. If the appraiser can meet the preferred timeframe, they can accept the order but they need to decline otherwise. Corelogic has something similar and I believe they call it Xcelerator. They are indeed turning independent contractors into employees. Glad to see these appraisers fighting back and getting compensated. If AMCs are going to control you, then why shouldn’t you get the employee benefits?

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  2. Jeff says:

    I have a lender who has tried to get me on Clear Capitals list because they need me in the market to complete appraisers because I have a good reputation. Clear Capital states they have sufficient appraisers in the area at this time. This is an example of an AMC’s overreach to control the market and the appraisers they work with. Not sure if this is a violation or not. Anyone else have insight on this

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    • wontobey says:

      Consider yourself lucky. Clear Capital is by far the worst amc. If you want to keep your good reputation, steer clear of CC!

      A must read…

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      • Jeff says:

        Yes I completely agree. I have zero interest in working with Clear Capital. The sad thing is there are some really great lenders that I could be doing work for but Clear Capital is standing in the way. Frustrating

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    • Jeff, show your client the two ClearVal Appraisals that were recently posted here and tell them that you don’t work for 10%; and refuse to lower your standards down to those deemed acceptable to Clear Capital.

      Excellent article Peter. We need to get the word out to more AMCs and orgs like REVAA. Maybe they’ll get the idea eventually.

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      • Jeff says:

        Yeah I should show them this article. I told them what transpired. AMC’s are now going to be obligated to post there fees to lenders so this is going to be exposed. These AMC’s are trying to take over our profession. I always said just think of how many certified appraisers Fannie Mae and the AMC’s have facilitated that are no longer appraising. There’s your shortage if there is one. AMC’s should be a thing of the past and I hope some day they will be so we can get back to being revered as professionals.

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  3. Carl says:

    If only they treated us like employees instead we’re being treated like children. I haven’t needed a report card since elementary school. These AMC scorecards are a joke. Another reason why I don’t deal with AMCs

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    • Baggins Baggins says:

      How else can regular phone workers and non real estate technical persons control the process and profit from unnecessary middle management positions? They have to add value somewhere. Enter performance grading which rewards incompetent work on both sides, shutting down traditional time consuming detailed appraisal labor and promotes corner cutting outsourcing and boilerplate above all else. If every single distribution person was required to have an appraisers license, only then could a middle management company begin to make informed intelligent decisions regarding distribution. But if every single person was required to have an appraisers license, all this deceptive practice would have to stop immediately. No more fee skimming, playing people against each other, outright lying and manipulating the process, etc. In the real world, our current situation is that amc’s pay their own technical persons far more than licensed appraisers. They hire technical staff at far greater pay scales. Even many amc’s current hiring pages indicate that you need 5 years experience to be an appraisal reviewer, but only need 3 years in hr or related services to ‘manage’ those appraisers. The goal of amc’s has changed over a very short period from simply raking off the top, to taking the entire amount and replacing the appraiser completely. Group licensing for amc’s has been almost completely ineffective. Now every single employee and worker at an amc clearly needs to carry an appraisers license or these destructive practices will not end and will only continue to accelerate licensed appraiser attrition from the industry. These companies actively discriminate against handicapped, elderly, parents, part timers, and more competent appraisers. But if you play good employee and flip pretyped outsourced work back at a discount beyond your peers, they profit more, and subsequently prefer to send you the work ahead of all others. Purely profit driven decisions in violation of fdic rules on distribution but since individuals are not licensed, there is no way to hold them accountable to existing rule sets.

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  4. Bryan says:

    As soon as EXOS went in to affect we went off the list. Please hold on to your independence – nothing matters more!

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  5. Bill Johnson says:

    My former appraisal trainer went over to the dark side some years back (Landsafe/BOA), and collected over $130,000 as part of that class action lawsuit. Call it a technicality, miss-classification, or what ever you want, but bottom line all of these companies attempt to rob the professional appraiser in some way or another. 

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  6. Jeff says:

    Its a shame how our profession is constantly under attack 

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  7. Y’all welcome to join American Guild of Appraisers. We fight back! Contact janbellas@appraisersguild.org 

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  8. Baggins Baggins says:

    When I started, my parents business was actually independent. They were assigned work because they were more competent, not because of performance standards or discounting to provide incentive to be selected.  We appealed to underwriters for approval on panels, nobody else mattered and mb’s had to work with whom the underwriter approved.  We were referenced by salespersons and regular borrowers because of our competency. 6 weeks standard turn and 450+ were common, 15 years ago. Middle management incompetence has decimated this industry and continues to do so. Companies like corelogic mercury and many amc’s have in unison adopted and promoted employee style engagement.  The lady at mercury told me she does not care about the appraisers ethic book and does not want to hear anything about that, ‘they’re just a technical service company.’ If I could get referenced by realtors and approved for quality rather than performance reasons by underwriters I could have really made it in this business.  As it stands now the vast majority of the time I deal with ‘approval’, I’m talking to some young telecom person who’s not even able to keep up with a simple technical sales phone call. They can’t talk real estate, don’t approve or assign by fdic rules, and they just look at the stats and see if they need more help. Anyone will do and there is a complete absence of well informed quality decision making. Appraisers who cut all the corners get all the love these days. Why a professional appraiser would brag about using datamaster and having a chauffeur, well, a sad state of affairs in this industry. 

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Reclassifying Appraisers as Employees

by Peter Christensen time to read: 3 min
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