Direct sellers and estate agents not employees: US senators propose amending 1938 labour law

Under US federal tax law, qualified direct sellers and estate agents have long been treated as independent contractors. The Fair Labor Standards Act, which governs wages and working hours, does not say the same. A pair of identically named bills in the Senate and the House aims to bring the two sets of law into line.

According to the National Association of Realtors (NAR), two Republican senators from Utah, Mike Lee and John Curtis, have introduced the Senate version of the Direct Seller and Real Estate Agent Harmonization Act. NAR's Washington Report says Lee introduced it in the Senate on 30 September 2026, with Curtis as co-sponsor. None of the reports gives a bill number for the Senate version, and the bill is awaiting consideration.

The House version was introduced in 2025

NAR describes the Senate version as a companion to H.R. 3495. According to the official congressional text, H.R. 3495 was introduced in the House on 19 May 2025 by California Republican Kevin Kiley, with Texas Democrat Henry Cuellar as co-sponsor, and was then referred to the Committee on Education and the Workforce.

NAR says H.R. 3495 has been advanced by that committee. However, none of the sources cited here says that either chamber has passed the bill.

The change is a single definition

The core of H.R. 3495 is section 2: it inserts a new paragraph (6) after paragraph (5) of section 3(e) of the Fair Labor Standards Act (1938), providing that "employee" does not include any direct seller or qualified real estate agent.

• The bill does not itself define who is a direct seller or qualified real estate agent; it refers directly to the definitions in section 3508(b) of the Internal Revenue Code of 1986.
• The text of the House bill as introduced contains no effective date and no other implementation provisions.
• This article could not verify from official text whether the Senate version is identical word for word to the House text.

Real estate and direct selling bodies are pushing together

NAR says the bill would clarify, under the Fair Labor Standards Act, that qualified real estate professionals and direct sellers are independent contractors, in line with their long-standing treatment under federal tax law. Shannon McGahn, NAR's executive vice-president and chief advocacy officer, said the bill would provide important clarity under the Fair Labor Standards Act. NAR also says 89% of its members work as independent contractors.

Florida Realtors reported the same development on 7 October 2026 and said NAR has supported such legislation in previous Congresses.

On the direct selling side, Dave Grimaldi, chief executive of the Direct Selling Association (DSA), wrote in Direct Selling News on 8 October 2026 that the Senate version gives qualified direct sellers specific recognition under federal wage and hour law. In the same signed article he said the US Department of Labor has sent the final draft of its independent contractor rule to the White House for review; for now, that claim appears only in the association's article.

Analysis: what it means for recruiting teams

What follows is this publication's analysis and is not legal advice.

The bill touches the first sentence of recruiting: once someone joins, are they an employee or someone running their own business? If the bill is eventually passed, qualified direct sellers and estate agents would clearly fall outside the definition of "employee" under the Fair Labor Standards Act. For teams built on commission and self-employed arrangements, this could give the current model an extra layer of legal footing at federal level.

The clearer the status, the greater the duty to explain. If new recruits are not employees, recruiters need all the more to spell out that income depends on their own sales, who bears the costs and what the relationship between company and individual is, rather than talking only about the opportunity.

The bill is still under consideration, and the final content of the Labor Department rule has not been officially published. A practical step is to check whether your team's existing recruiting explanations make the nature of the arrangement clear, rather than waiting for the law to be settled before catching up.

Compiled by the F50 Editorial Team from public sources, for general reference only and not professional advice. Details are correct as of the publication date and may change.