Mark Pestronk
Mark Pestronk

Q: An independent contractor (IC) of our agency has just won a corporate account. The IC can handle all day-to-day counseling and reservations for the account, but our agency needs to provide backup, after-hours service and all of our service and technology bells and whistles. The account has requested a contract. Should the contract with the account be in the IC's name, with us as subcontractor, or should the contract be in our name, along with a commitment to use the IC as the travel advisor? If both configurations are possible, what are the advantages of each?

A: Both configurations are indeed possible, and my recommendation would depend on the wishes and expectations of the account and the IC. If neither party has a strong preference, my recommendation would be to put the contract in your agency's name so that you can more closely control the relationship with the account.

In my experience, the majority of such contracts are in the agency's name, for a few reasons. First, the agency typically has a standard corporate account contract that can probably be easily filled in with a few particulars, whereas changing it around would be a more complex task that may not be worth the effort, given the size of the account.

Second, ICs typically solicit corporate business by featuring the capabilities of the agency as a whole, including its technology and industry affiliations and contacts, so accounts tend to expect that the contract will be with the agency.

Third, ICs may not want the liability that comes with being a contracting party. If your agency is negligent, the IC is liable to the account if it is a party to the contract.

On the other hand, some ICs insist on having the contract in their own names in order to ensure that the IC can move the account to another host in the future. Further, by making your agency the IC's subcontractor, the IC will have more legal rights and leverage over your agency's performance of its portion of the work than if it were not a contracting party.

You might also want the contract to be in the IC's name if you have no relationship with the account. If the account is going to pay for airline tickets by weekly or monthly check, you might want the IC to be responsible to you, as subcontractor, for payment even if the account fails to pay the IC.

Finally, you may be concerned that a taxing authority might see a contract in your agency's name with the IC as an assigned agent as grounds for reclassifying the relationship because of your control over the IC's work. In that case, having the IC retain you as subcontractor will help avoid this potential problem.

If no one has a preference, then just issue your regular corporate-account contract with the IC as the assigned agent. If needed, you can have a separate agreement with the IC allowing the IC to move the account to a new host.

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