Mark Pestronk
Q: In your Sept. 15 column, you wrote about how hosts can tighten up their independent contractor agreements to avoid potential disputes. I am an IC, and from my point of view your suggestions were all favorable to hosts, not ICs. What about some suggestions that would help ICs improve their contracts with hosts?
A: Above all, make sure that the compensation language is clear and comprehensive. For example, you need to specify whether "commissions" include other forms of travel agency revenue, such as markups and fees.
In the case of groups, try to specify how and when "commissions" are calculated. They can be figured before or after direct expenses and before or after the host's group accounting closes.
Make sure that the host's payment deadlines are fixed. For example, the deadline can be a specific day of the month after the month in which the host receives the supplier's commission, or the deadline can be on a periodic schedule, such as every two weeks.
Absent a lawsuit, ICs are fairly powerless to force payment from a host that doesn't pay on time or at all, but having a fixed payment deadline will make timely payment more likely than having no deadline.
Check for a clause stating that the host must provide a detailed accounting of sales and commissions along with each payment. Get the right to audit the host's records once a year if you suspect that the host is not accounting for all supplier revenue that it received.
Make sure the agreement specifies what rights the host has to deduct costs for debit memos, extra services by the host and the like. Typically, hosts' standard agreements require you to indemnify them against any liability or expense that you create, regardless of whether you are at fault, but specificity is better for you.
Some IC agreements provide for compensation for referrals, for both leisure and corporate travel. If your host offers a split for these, it is vital to specify whether the payments apply to future trips, and if so, for how long.
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 IC relationship. Either way, you should specify.
If you become disabled, the host should have the obligation to fulfill your clients' travel arrangements at your request and perhaps provide you with a lower commission split. If you die, the host should be obligated to pay something to your estate, too.
After termination, the host will usually have the right to solicit your clients, unless your contract prohibits it. Remember that, in the absence of contractual restrictions, each party is free to solicit and service the other party's clients.
If the host can terminate your agreement without cause (as almost all IC agreements allow), try to specify that some advance notice, such as 30 days, is required, so you can be all set to start with another host at termination.