Compass Has Some Explaining to Do
It’s an Ethics renewal year, and we all know what that means! The National Association of REALTORSⓇ (NAR) requires its members to complete a minimum of 2.5 hours of instructional time centered on their Code of Ethics before 12/31/2021. If you aren’t caught up, The CE Shop can help with our engaging Ethics courses. If you’re rolling your eyes at the idea of an interesting Ethics course, we understand — so don’t take our word for it. Check out what our students think of our Ethics offerings here.
While it’s crucial to understand how to act ethically as a real estate agent, it’s equally important to highlight unethical behavior within the industry.
Recently, popular real estate brokerage Compass has been hit with another lawsuit from former real estate agents in Northern California. Let’s break down the situation so that you can decide for yourself who’s in the right.
How Compass Allegedly Cheated Their Employees
Compass is facing fraud allegations from former employees who are seeking a class-action lawsuit against the brokerage. In what many are calling a “bait-n-switch” operation, the New York-based brokerage allegedly defrauded its real estate agents out of millions of dollars in sales commissions and broke pledges to give agents shares of company stock.
“Employers like Compass violate California employment and labor law every day to make it appear to investors and the general public alike that the company is doing well financially and increasing market share,” reads the complaint.
The complaint has been brought to the state by Lisa and Todd Sheppard, a sales team that ran a boutique brokerage in Sonoma County. The couple alleges that the brokerage lured them in with the promise of a signing bonus, marketing budget, and office space in 2018. Reportedly, the sales team was told they would keep 90% of each sales commission, and Compass would receive 10%. According to the lawsuit, the brokerage instead deducted from their commission on each sale. Per The Real Deal, the company also “allegedly deducted from the couple’s commission if the team made less than the standard 5% rate for each home sale.” (Typically, the rate is usually split evenly between the buyers’ and sellers’ agents.)
When the couple formally complained to Compass about these deductions, the company responded that it has the authority to deduct expenses under its “terms of engagement” with agents. However, the Sheppards stated that they were never presented with these terms.
Lastly, the Sheppards contended that Compass deceived them with promises of stock when the company went public, which it did this year. They report receiving an “inferior level of stock” compared to the company’s shares of common stock.
This Isn’t Compass’ Only Lawsuit
This lawsuit follows earlier accusations of similarly fraudulent behavior by a Los Angeles-based real estate agent, J. Gregory Maffei. Maffei has accused the real estate brokerage of fraud, breach of contract, violation of labor law, and non-compliant wage statements.
“This class action challenges Compass’ unfair, unlawful, and fraudulent business practices that were designed to gain market share by luring top real estate agents with promises of high commissions and compensation packages that include bonuses, covered business expenses, and stock options to hire them from Compass’ competitors,” said Maffei in his complaint.
Further, his complaint reports that Compass had raised “more than $1 billion in funding from venture capitalists to support its ‘bait-and-switch’ tactics and to account for the losses Compass has incurred by overpaying and poaching its competitors’ real estate agents.”
And it’s not just agents who are upset with this company. In 2019, Realogy filed a 68-page complaint against Compass, alleging that they used “price-fixing and collusion, ‘predatory’ poaching and unfair business practices.”
Only time will tell how the courts will make sense of this multi-lawsuit scandal.