Mark Pestronk
Q: Our agency has many independent contractors, and they have all signed an IC agreement that is now several years old. Are there any new issues or protections that we should consider adding to the contract based on your experience in the last several years?
A: Host agencies appear to be competing with each other more than they did even a few years ago, and as a result experienced ICs are more likely to switch to hosts that offer higher compensation. So the biggest new area for protection of host agencies is how to prevent loss of commissions for pending bookings that get transferred to an IC's new host.
The law of agency states that the host through which the IC made the booking is entitled to the commission. This is called the procuring cause doctrine.
Unfortunately, departing ICs can get around the procuring cause doctrine by having the client cancel and having the IC rebook with the IC's new host. There is no way to prevent the supplier from paying commission only to the new host, unless the supplier is very small, has a good relationship with the old host and can keep track of which agency is entitled to the commission.
You can deter switching of bookings and cancel-and-rebook evasions to some extent by flatly prohibiting those activities in your IC agreement. If it nevertheless occurs, you have the right to withhold the IC's compensation from bookings that have stayed with your agency.
Your agreement can also expressly allow the IC to transfer the booking if the IC gets the new host to agree in writing to remit to you what would have been your share of the commission. I realize that none of these clauses would prevent an IC from transferring all their bookings in breach of your agreement, but they would be better than nothing, and if the transfer were massive enough, you could sue the ex-IC.
If the IC goes to a new host and does not transfer a booking but essentially abandons it, you can provide that the IC consents to your taking it over and paying the IC nothing or reduced compensation.
Similarly, you can provide that, in the event of IC's death or disability, the IC expressly consents to having your agency take over pending bookings, and you will pay the IC's representative or to IC, as applicable. But if you must make modifications, then compensation will be reduced by half.
Other protections that you could consider, based on my experience, include the following:
- Prohibit the IC from booking on public websites. This practice often makes bookings noncommissionable and even nontraceable. It also binds the client to the very oppressive terms and conditions of those consumer websites.
- Prohibit the IC from giving out any logins in response to any email or phone call, no matter who requests it. Such phishing emails and phone calls can result in major losses to the IC and the host due to fraud.