Mark Pestronk
Q:I have several questions related to transferring pending bookings from one agency to another. First, if an employee books a cruise, tour or all-inclusive resort while employed at our agency and then quits, is his or her new employer entitled to the commission? Does it make any difference if the agent is an independent contractor instead of an employee? Does it make any difference if the client wants the move to take place? Does it make any difference if the client cancels and rebooks with the other agency? Does it make any difference if the supplier happens to pay the other agency and not us?
A: The answer to all five of your questions is “no.” In all cases, your agency is legally entitled to the commission, and you could successfully sue both the ex-employee or independent contractor and the new agency for your loss.
The basic legal principle here is that the agency that makes the sale is legally entitled to the commission, and no subsequent activity can undo that legal entitlement. This is the “procuring cause doctrine,” and it applies to sales by agents in all lines of business, including real estate.
When an independent contractor rather than an employee books using your agency, the outcome is the same. Similarly, the outcome is the same when the client wants to move the booking or cancels and then rebooks: Your agency made the sale, and neither the client’s wish nor the cancellation and rebooking matter.
There is also a basic nonlegal, business principle at stake: You usually need to do what the client wants, and if the client wants to move the booking or cancel and rebook, you probably do not want to, or cannot, stop the client.
The two principles appear to be at odds, which is probably why so many agency owners and agents have trouble with these questions. How can you keep the commission if the client wants to move the business?
The answer is that the issue of what the client wants is different from who is entitled to the commission. If you keep them separate in your mind, my answers become clear.
Now, let’s now turn it around: When an ex-employee or independent contractor of another agency comes to you and offers to bring in a number of pending bookings, do you have to turn the business down because moving the bookings would be illegal? No, you don’t have to refuse; you simply need to remember that you are opening your agency up to a claim by the old agency for all the commissions.
In such cases, a smart approach might be to wait until the old agency contacts you and then offer to share the commissions. Although you actually owe the old agency all the commissions, the latter will certainly realize that a fair split is preferable to a lawsuit.
The only exception to the procuring-cause doctrine is the case of the supplier that has a published, contractual policy of paying only the new agency. As far as I know, only Regent and Oceania have such a policy, unless the old agency held the booking for more than 30 days.
In the absence of such a published policy, it does not matter if the supplier pays the new agency.