Ni Mar10 PG10:NOV_08_p.6-13_News_legal.qxd 24/02/2010 15:57 Page 10
Ni Legal
Commercial Agents - Key Issues
The Commercial Agents Regulations (celebrating their 17th birthday)
continue to act like a teenager - often frustrating, occasionally
endearing but usually just plain irrational!
Solicitor Michael Morse looks at important issues in this
topical area....
Payment
The Jackson case is significant for a different reason. It relates not to
When an agency is terminated, the agent is usually entitled to be paid. The
principal/agent but instead to manufacturer/distributor. Where the latter will
calculation method could be either ‘indemnity’ or ‘compensation’. These are
struggle to replace lost business or find another brand, then the notice
very different.
required of a manufacturer may be quite long (eg 9 months).
The Regulations have a default setting of ‘compensation’. That is the system
that used to follow a 2 year tariff. Costs
A valuable tool is, however, available to a principal. An Agreement can ‘It’s a matter of principle’ – music to the ears of lawyers. In the event of a
expressly provide for ‘indemnity’. This will cap the payment at 12 months’ claim, however, there should be early assessment of risk.
commissions. An agent who is a union member will enjoy special benefits, such as funding
No arguing. No legal wrangling. Just 1 year and that’s it. claims. Instead of £150 an hour, you find they are entitled to maybe £300 an
Without an indemnity, payment will be assessed by the compensation hour – from you !
method. A 2 year fixed tariff no longer applies. But this does not mean a A claim of even £10,000 can generate costs of £20,000 on each side. Larger
principal will necessarily pay less. It could be more. claims produce very large cost figures. Principles are all well and good, if
A multiplier will be applied to an average year’s earnings. This could range you’re prepared to pay for them.
from 1 to 3, depending on the success of the agency. Factors include –
Well established agency ?
Bigger Picture
On an upward curve ?
Take the following hypothetical situation:
Successful products ?
2 people do the same job
One is a rep; the other an agent
If none of these boxes are ticked, the multiplier will be very low. On the other
Both make the same sales
hand, if all the boxes are ticked, a multiplier of 3 may be appropriate. Three
Both take home £40,000
years’ income is payable.
The company is unhappy with their commitment and performance. The brand
Retirement is very popular but the products sell themselves. These two just ride along.
A company may find that, despite wanting an agent to continue, he has other
ideas. Principals are key to agents’ retirement plans. The rep is sacked and the agent terminated. What risk could the company run
The same payment issues arise. And it is not essential that the agent be 65 from each ?
(though the closer he is, the stronger his claim).
Caution is called for. It is not unknown for people to retire once, only to Rep – Unfair Dismissal of £65k capped
resurface later working for a competitor. No costs
Planning is required, with long notice periods and other ways to cushion the Agent – Compensation of £120k
impact of unexpected retirement. Costs say £40k
Reasonable Notice
Good advice is paramount, before its too late. There may be compelling
Principals and agents have substantial freedom to reach their own agreement
reasons to use agents. The industry owes them a great deal and in good times
regarding notice.
they are invaluable. But companies must appreciate the commercial realities if
If there is no agreement, then the default setting of the Regulations is 3
things go sour.
months. Average earnings are calculated and an agent is entitled to 3 months
notice pay.
a73
Michael Morse
A Court recently found that ‘reasonable notice’ of termination could be 9
a73
Tel: 0113 225 8811
months. So has the Regulations’ default setting changed ? a73 Email: mmorse@godloves.co.uk
10
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NURSERY INDUSTRY
•
MARCH 2010
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www.nursery-industry.co.uk
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