Q’s and A’s on Agency Law - November 2013
© David Bentley, Bentley and Co, Leeds
Q. I am aged 64 years and am planning to retire as an agent, next year. In taking this step, I want to know how to go about making a claim for compensation against each of my four principals, and ensuring that I am paid my entitlements. Can you please advise me as to how to go about this?
A. The first point to make (and to stress) to you is that whereas Regulation 18(b)(ii) does (indeed) make reference to agents retiring on grounds of age, the full implication of that Regulation is that reaching any particular ”milestone” age is not of itself sufficient to automatically bring you within the scope of the legislation, and to thus entitle you to bring a claim for compensation or (as the case may be:-) an indemnity. What in fact Regulation 18 goes on to additionally require (amongst other things) is that the agent can show that, on account of his age (and Regulation 18 does not specify any actual age number), he or she “cannot reasonably be required to continue his/her activities” and establishing that additional facet is not necessarily straightforward. For example, this “cannot reasonably be required” proviso might be aligned to the agent’s simultaneous ill health or to some other relevant circumstance, but, whatever it is, every agent needs to be clear that (and principals are becoming wise to this) merely (a) reaching a particular age, (b) retiring on the basis of that age, and then (c) expecting to then have an automatic entitlement to compensation/indemnity is not how it necessarily works in practice and, on account of that, we (Bentley and Co) have a particular (alternative) way of approaching retirement situations (to avoid agents who have retired ultimately receiving nothing at all in terms of any form of compensation) - that way is to make sure that agents do not commit to retirement before taking certain steps, which steps may ensure that appropriate compensation is duly agreed.
As a footnote to the above, agents always need to be aware that once they have notified their principals that they are definitely retiring on a particular date (i.e.- in effect, given notice of termination) it may be impossible to then withdraw from that position.
Q. My main principal has recently terminated my agency, and I want to pursue my entitlement to compensation equivalent to two years commission earnings based on the average of the last three. What is the best way to explain this to my principal?
A. In all the years that we have been handling agents’ claims for compensation, the assumption (as to how compensation amounts are authoritatively calculated in this Country and) as set out in your question has been a consistent and recurring theme amongst many agents. It is however simply not right, and never has been:-
Prior to the landmark House of Lords’ decision in Lonsdale in 2007, there were a series of (less) authoritative Court decisions setting out what needed to be taken into account in calculating compensation amounts, but (and as I say) at no point since the inception of the legislation in 1994 has the rule of thumb approach which you have set out represented anything of a binding and authoritative approach.
Following on from the above (and nowadays), the way in which compensation is calculated (and pursuant to this decision to which I have referred in Lonsdale) is (very broadly speaking) based on the loss of the value or goodwill which an agent can be said to have possessed in his or her agency, as at the point of or immediately before termination and that eventual amount, and depending on all of the circumstances, might potentially be significantly greater than equivalent to (just) two years commission earnings based on the average of the last three. The point however is that, whatever is the actual calculation in each instance, to say that the way that compensation is calculated is as you have described in your question is without legal foundation and so that, and with respect, your inaccurate assumption needs to be pointed out.
Q. A company which I have represented for approximately seven years has terminated my agency and has said that they do not require me to work my notice period. This is a big blow as far as I am concerned as I have a contract which entitles me to six months notice, and I feel that they are trying to avoid paying me my full entitlements. Can I take out a Court order forcing the Company to allow me to work the full period of notice?
A. If any principal does not require you any longer to represent it as its agent then, although you would ordinarily then have substantial financial rights (both not only in respect to the notice period but also potentially (a) to receive compensation/an indemnity, and (b) to be paid pipeline transaction commissions), that is its [the principal’s] prerogative.
With further regard to the above and what you have explained in terms of the length of the notice period (and unless the reason why your agency was terminated was on the basis that it can be proven that you had acted in fundamental breach of any of your obligations, and so as to have entitled the principal to terminate your agency without any notice at all), your principal would ordinarily have to pay you a sum of money representing what you would have earned over the notice period. If therefore the timing of the notice is depriving you of selling over a particularly lucrative period of the year, the amount you should thus receive by way of “damages in lieu of notice” should obviously particularly reflect that.
Q. I am not receiving co-cooperation from my main principal, and I am beginning to wonder if, without informing me of its decision, they have actually terminated my agency. Not only is this a concern to me for all obvious reasons, but, if I have been terminated, I additionally don’t want to be wasting my time making calls and spending time looking to get customers and orders if I am not supposed to be doing that, nor if I am not going to get paid the corresponding amounts of commission. How do I resolve this situation?
A. Your principal is plainly being professionally discourteous and forgetting that agents are very obviously entitled to be promptly informed about basic and very serious decisions potentially having been taken without their knowledge, such as this. At the same time, you must be careful not to make assumptions, nor to (inadvertently) take a step which might actually be regarded as your having terminated your own agency (which may likely then mean your not ultimately being entitled to receive any form of compensation).
Following on from the above, what you should do is to write to your principal (courteously but directly) highlighting the facts as you see them to be, and (b) seeking clarification as to the status of your agency - i.e.:- whilst making clear that you of course wish that your agency continue and that you continue to carry out your role with your usual endeavour and professional enthusiasm, you need to be made aware if, on account of the lack of any form of co-operation from the principal, it has in fact terminated your agency.
The above letter/e-mail you need to send will take some careful drafting and will only be appropriate in certain circumstances - as ever, therefore, I would strongly recommend that you promptly seek our further legal advice before doing anything (and so that the required e-mail could be carefully drafted for you), although I hope that the answer which I have set out above gives upon an indication of what your position appears in principle to be, and how it should be handled.
Q. My principal has told me that one of the best customers in my territory has recently contacted them to say that they don’t want any longer to deal with me, and so that this will become a house account with my no longer being entitled to receive any commission. I find all of this very odd to understand, as I have always gotten along very well with this customer, and actually introduced it to my principal, many years ago. What should I do, and is it right that I am no longer entitled to receive any commission?
A. As in previous answers in these columns, the first thing to establish in this sort of situation is as to whether (a) you have any written agreement with your principal and (if so) as to whether that may include any sort of provision entitling the principal to take this sort of step, and/or (b) whether this sort of practice has occurred before, and how you responded in that prior instance.
Subject therefore to what I have explained above, the answer to your question may very well be that, on the basis that you are an exclusive agent for this principal (i.e.:- you are entitled to receive commission on all sales, irrespective as to whether or not you procured any particular sale in any specific instance) your principal cannot take this step without it also continuing to pay you ongoing commission and/but if the principal continues nevertheless to ignore your rights as I have described them to potentially be, you may then have the further right to question as to whether or not, by its actions, the principal is thereby constructively terminating your agency.
As a footnote to the above:- The above sort of scenario is often (legally) very complicated and, for its successful resolution as to the outcome, it relies on (a) your seeking legal advice very promptly, and (b) your communicating in writing in appropriate terms to your principal (again:-) very quickly and decisively.
Q. I have a friend in France who is also an agent and who tells me how (as it appears to him) straightforward and generous is the system over there, for compensating agents. Given that we are all in the EU and that the Agents Regulations is “European Law” what is to prevent me from bringing a claim based on France law in the event of any of my agencies being terminated?
A. Your question touches on another common misconception amongst agents, and that is that there is supposedly a European Law upon which they can rely in pursuing their rights against their principals. In actual fact, the UK’s Commercial Agents Regulations are derived from an EU “Directive” and that Directive is also the source for other EU Countries’ legislation which, to a greater or lesser extent, is comparable to our [the UK’s] own 1993 Regulations.
The point in the above (however) is that the law which ordinarily governs agents operating in the UK is this Country’s legislation (albeit, and as I say, as derived from the original 1985 EU Directive) and that each EU Country’s laws are similarly their own, and are not identical to each other’s. It is therefore technically very wrong in this sense to thus refer to being entitled to various rights pursuant directly to “European” Law.
Following on from the above and to further answer your question, unless you have a written agreement with your principal which stipulates the application of French law and/or you are based and operate in France, then (and unless any other EU Country’s laws for similar reasons to those which I have just explained apply) your rights would be based on the UK’s Commercial Agents (Council Directive) Regulations 1993.
© Bentley & Co Solicitors 7 Littlemoor Road, Pudsey, Leeds, LS28 8AF T:- 0113 236 0550 e-mail:- - The ONLY law which we practice is the law as it relates to commercial agents and 1 September 2013 marked our eighteenth successful anniversary. Over the course of the last decade and a half, Bentley & Co has recovered back for commercial agents millions of pounds in total.
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Please ensure that you obtain legal advice before acting in reliance upon anything in this article, particularly since each individual’s circumstances may necessitate a unique approach, and also on account of the fact that the law may of course at any time change. Furthermore, please be very clear that the answers given in this column may not cover or otherwise refer to all possible angles, aspects, relevant information and/or points of law and so that all or any information which is given above needs in every instance to be referred for legal advice for clarification and amplification, before being relied upon.