A key U.S. House committee has approved legislation designed to permanently classify real estate professionals and direct sellers as independent contractors under federal labor law. The bill, known as the Direct Seller and Real Estate Agent Harmonization Act, aims to resolve a long-standing inconsistency between federal tax and labor regulations.
Introduced by a bipartisan duo, Representatives Kevin Kiley (R-Calif.) and Henry Cuellar (D-Texas), the measure passed the House Committee on Education and Workforce. It now proceeds to the full House of Representatives for further consideration. Industry groups have voiced strong support, arguing the change would provide legal clarity and protect the business model used by a vast majority of real estate agents.
Key Takeaways
- The House Committee on Education and Workforce has passed the Direct Seller and Real Estate Agent Harmonization Act (H.R. 3495).
- The bill seeks to classify real estate agents and direct sellers as independent contractors under the Fair Labor Standards Act (FLSA).
- This change would align federal labor law with existing tax law, which has recognized this status for decades.
- Major industry organizations, including the National Association of REALTORS®, strongly support the legislation.
Details of the Proposed Legislation
The core purpose of the Direct Seller and Real Estate Agent Harmonization Act is to amend the Fair Labor Standards Act (FLSA). This federal law establishes standards for minimum wage, overtime pay, and recordkeeping, but its application to certain professions has remained ambiguous.
For decades, the Internal Revenue Service (IRS) has treated real estate agents as independent contractors for tax purposes. This allows them to operate as self-employed individuals, managing their own business expenses and work schedules. However, federal labor law has not explicitly provided the same classification, creating potential for legal challenges and regulatory uncertainty.
The bill aims to eliminate this gray area by codifying their independent contractor status into the FLSA. Proponents argue this would create a consistent legal standard across federal agencies.
Bipartisan Sponsorship and Goals
The legislation is sponsored by Rep. Kevin Kiley, a Republican from California, and Rep. Henry Cuellar, a Democrat from Texas, highlighting its bipartisan appeal. According to the sponsors, the bill is intended to support worker flexibility and reduce bureaucratic hurdles.
“For decades, the tax code has recognized direct sellers and real estate agents as independent contractors. These workers deserve our support to thrive, not more bureaucratic uncertainty. Clarifying our labor laws will support hard work and innovation while providing workers with the flexibility they so clearly need.” - Rep. Kevin Kiley (R–Calif.)
By providing a clear definition, the act aims to prevent future regulatory actions or court rulings that could reclassify these professionals as employees, a change that industry advocates say would disrupt the real estate market.
Background on Independent Contractor Status
The distinction between an employee and an independent contractor is critical under U.S. law. Employees are entitled to protections like minimum wage, overtime pay, and unemployment benefits. Independent contractors are considered self-employed business owners who have more autonomy but do not receive these benefits from the companies they work with. In real estate, agents typically work under a brokerage but operate their own business, making the contractor model prevalent.
Widespread Industry Support
The move by the House committee has been met with applause from major real estate organizations, which have long advocated for this legal clarification. The National Association of REALTORS® (NAR), a prominent trade group, was a vocal supporter during the committee's review process.
Shannon McGahn, NAR's executive vice president and chief advocacy officer, thanked the committee for advancing what she described as a “commonsense, bipartisan bill.” She emphasized the importance of aligning federal laws to prevent confusion.
“Just like we have in previous Congresses, NAR strongly supports this commonsense, bipartisan bill, which is designed to clarify the Fair Labor Standards Act and ensure that real estate professionals are treated fairly and consistently under federal law,” McGahn stated.
Real Estate's Economic Footprint
According to the National Association of REALTORS®, the real estate sector is a significant driver of the U.S. economy. The industry reportedly contributes nearly 20% of the nation's gross domestic product (GDP). This figure includes everything from construction and home sales to rentals and remodeling.
State-Level Endorsements
Support also came from state-level associations. The California Association of REALTORS® (CAR) highlighted the bill's importance for professionals in the nation's largest real estate market.
Heather Ozur, the 2025 president of CAR, commented on the necessity of the legislation. “This legislation is essential to providing clarity under federal labor law and protecting the independent contractor status that allows real estate professionals to build their businesses and serve consumers,” Ozur said. She also expressed gratitude to Rep. Kiley for his leadership on the issue.
Implications for the Real Estate Profession
The independent contractor model is the foundation of the modern real estate industry. It offers agents the flexibility to set their own hours, develop their own marketing strategies, and manage their business finances. This autonomy is often cited as a key attraction of the career path.
Data from NAR indicates the scale of this practice:
- 89% of NAR members are currently classified as independent contractors.
- This model allows agents to be paid on commission, a standard practice in the industry.
- A shift to employee status could require brokerages to pay salaries, overtime, and benefits, fundamentally changing their business and cost structures.
If enacted, the bill would solidify this long-standing practice, providing legal certainty for hundreds of thousands of real estate professionals and the brokerages they associate with. Advocates believe this stability is crucial for the health of the housing market.
Next Steps for the Legislation
Having successfully passed the committee stage with bipartisan backing, the Direct Seller and Real Estate Agent Harmonization Act now moves to the floor of the U.S. House of Representatives. It must be scheduled for a vote by the full chamber.
If it passes the House, the bill would then need to go through the legislative process in the Senate. Should it pass both chambers of Congress, it would be sent to the President's desk to be signed into law.
Industry groups like NAR have pledged to continue their advocacy efforts to ensure the bill's passage. They argue that its enactment is a necessary step to protect a business model that has defined the real estate industry for generations and provides a flexible career path for entrepreneurs across the country.
