Q: I am a home-based agent hosted by a brick-and-mortar agency. Could you give me some advice about what changes I should be requesting to the standard-form "independent contractor agreement" that my host has sent me?
A: According to Travel Weekly's 2014 Travel Industry Survey, 52% of U.S. travel agencies are now home-based. The majority of these are probably independent contractors, and the majority of those probably have standard independent contractor agreements that overwhelmingly favor the host and omit key points that could make the contract clearer and more equitable. If you are reviewing one of those independent contractor agreements, here are a dozen key issues to focus on:
1) Is the commission split clear and comprehensive? You need to specify whether "commissions" include other forms of travel agency revenue such as markups, point-of-sale overrides, back-end-overrides and fees. If not, the agreement needs to specify what the term does not include.
2) In the case of groups, how and when are "commissions" calculated? They can be figured before or after direct expenses, and before or after the group accounting closes.
3) What rights does the host have to deduct costs from your split for debit memos, refunds and the like? Typically, hosts' standard agreements require you to indemnify them against any liability that you create, regardless of whether you are at fault.
4) Are there any costs that you must pay, such as desk rental, listed in the agreement, and is the method of payment clear?
5) Must the host provide a detailed accounting of sales and commissions along with each payment?
6) Are the host's payment deadlines fixed? Is the deadline a specific day of the month as opposed to a date after the host's accounting is finished?
7) Do you have the right to audit the host's books in case you dispute the host's payment? Revenue accounting is always more complicated than it sounds in theory, so you may want the right to have a CPA do the auditing.
8) Do you have the right to receive residual commissions after termination of the agreement? If so, for how long?
9) After termination, does the host have the right to solicit and service your clients? Remember that, in the absence of contractual restrictions, each party is free to solicit and service the other party's clients.
10) Are your rights to reduced-rate travel, fam trips and the like, if any, set forth in the contract?
11) Are you allowed to work with other agencies, or must you work only with the host? Contrary to popular belief, exclusivity clauses do not automatically result in IRS reclassification of the independent contractor relationship, as the IRS does not view exclusivity as a red flag.
12) May the host terminate you without cause, and if so, how much notice is required? In most cases, either side can terminate without cause, but you want to make sure that the host must give you sufficient advance notice of termination so you can be all set to start with another host at termination.