Screening independent contractors and other precautions

By Mark Pestronk
Mark PestronkQ: In last week's column, you covered the top 10 legal problems that agencies face today. What can we do to prevent these horrible things from happening to our agency? 

Since fraud by independent contractors (IC) is the No. 1 problem, you should carefully screen potential ICs. Conduct in-person interviews, if at all possible. Check at least two references, ask suppliers about the IC's reputation and check credit and criminal records.

If the IC has no references because all previous employers or hosts are out of business, as often happens, or because the references won't comment, then you should seriously consider declining to retain the IC. Make the IC get his signature notarized, and then check with the notary to make sure that the notarization was not forged.

To prevent credit card chargebacks, require your employees and ICs to follow the credit card sales rules in Section 6 of the ARC Handbook, if feasible. Educate them about reservation violations for which suppliers will hold you responsible, such as hidden-city ticketing and unmarried segments, and require corporate accounts to indemnify you against such violations by their employees.

Prohibit ICs and employees from collecting cash, using their own credit card merchant accounts and depositing checks in their own accounts. Have a trusted employee review all big-ticket sales and weekend tickets for signs of fraud such as suspicious one-way travel from unusual points of origin.

Prohibit employees and ICs from signing any vendor contracts or leases without your express written permission. Refrain from signing supplier-inventory contracts, such as hotel blocks, in your agency's name unless the client has agreed to reimburse you for any losses.

Where an airline has an agency desk allowing agents to call and charge tickets to a credit card, give serious consideration to having the carrier delete your agency from the list of those allowed to book that way. Fraudsters have been using agency code numbers to make phone reservations, and when a credit card is charged back, the carrier holds your agency responsible.

Make sure your employees and ICs understand that emails soliciting their GDS logins or containing a link to a login are always fraudulent phishing attempts to break into the GDS and issue tickets in your agency's name. The carriers and ARC hold your agency responsible.

Require your employees and ICs to use disclaimers in all transactions except those for corporate clients that sign contracts with your agency. It is not usually necessary for clients to sign the disclaimer, so you can attach it to an email quote or other document before the client becomes bound. You can find samples at   

Offer cancellation and medical insurance to every leisure traveler. If the client suffers a financial loss, he is much less likely to blame your agency if you offered insurance, even if -- as is very possible -- the insurance does not cover the loss.

Train your staff and ICs to be sensitive to sexual harassment, and require them to report it to you if they notice it, so that you can take prompt, effective action. Such action is the only way to protect your business against liability for sexual harassment of your employees by other employees or third parties.

In my next column, I will deal with how to lessen the damage if any of these horrible things occur.

Mark Pestronk is a Washington-based lawyer specializing in travel law. To submit a question for Legal Briefs, email him at 
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