A licensed time-share salesperson was not entitled to unemployment benefits following the termination of her service agreement with a time-share company because she was a “licensed real estate agent” excluded from the Tennessee Employment Security Law, the Tennessee Supreme Court has ruled. Westgate Smoky Mountains at Gatlinburg v. Phillips, et al., No. E2011-02538-SC-R11-CV (Tenn. Dec. 23, 2013). Declining to impose unemployment tax liability on the time-share company, the Court reinstated the judgment in favor of the company.

Background

Cynthia L. Vukich-Daw, a licensed time-share salesperson, sold time-share interests at Westgate Smoky Mountains at Gatlinburg pursuant to an independent contractor agreement. The agreement provided that Vukich-Daw would be paid on a commission basis and would be responsible for her own income and payroll taxes. In November 2009, Westgate terminated the agreement, and Vukich-Daw subsequently filed a claim for unemployment compensation with the Department of Labor and Workforce Development. 

The Department concluded that Vukich-Daw was entitled to unemployment benefits because it determined that, as a time-share salesperson, she did not fall within the Employment Security Law’s definition of a “licensed real estate agent,” which is excluded from the definition of “employment.” Westgate appealed, and the Tennessee Chancery Court reversed the Department’s determination, finding Vukich-Daw was a “licensed real estate agent” and not entitled to benefits. Vukich-Daw appealed, and the Tennessee Court of Appeals reversed. The Tennessee Supreme Court granted Westgate permission to appeal.

Applicable Law

In Tennessee, a worker’s eligibility for unemployment benefits depends on whether the worker’s services meet the statutory definition of “employment.” The Employment Security Law excludes from “employment” the services of a “qualified real estate agent.” A person is a qualified real estate agent if: 

• the individual is a licensed real estate agent; 

• substantially all of the remuneration for the services performed as a real estate agent is directly related to sales or other output, rather than hours worked; and 

• the individual performs services pursuant to a written contract providing that the individual will not be treated as an employee for federal tax purposes. 

Tenn. Code Ann. § 50-7-207(c)(11)(A)-(C).

Not Entitled to Benefits

To determine whether Vukich-Daw was a “qualified real estate agent,” the Tennessee Supreme Court examined whether her activities were covered under the Tennessee Real Estate Broker License Act of 1973, Tenn. Code Ann. §§ 62-13-101-604. Under the Act, individuals who, in exchange for a fee, solicit or negotiate the listing, sale, purchase, exchange, lease or option for any real estate, must be licensed by the Tennessee Real Estate Commission. In 1981 and 1989, the Tennessee General Assembly enacted the Time-Share Act to require licensure of time-share sales agents and time-share salespersons under the Act. 

The Court noted, “[T]his series of enactments . . . placed time-share intervals within real estate activity and required those engaged in time-share transactions to hold a license from the Real Estate Commission.” (An “interval” is a time period that is sold to a buyer.) Given the interrelationship between the two statutes, the Court concluded that the General Assembly would view time-share salespersons and affiliate brokers similarly under the Employment Security Law and exclude them from coverage as “qualified real estate agents.” The Court further pointed out that Vukich-Daw was paid on a commission basis and performed services through a written contract stating she was responsible for payment of her own taxes — thus satisfying the exclusion’s other requirements. Accordingly, the Court held Vukich-Daw was excluded from the Employment Security Law and not entitled to unemployment benefits.