Mark Pestronk
Q: Our agency hosts a number of independent contractors (ICs). We do not offer the most favorable commission split to our ICs because, unlike most hosts, we offer a large number of support services. Lately, some of our veteran ICs who do not need much support have switched to other hosts and have tried to have their bookings transferred to the new hosts. Can we prohibit such transfers? What if the IC gets the client to cancel and rebook without a “transfer”? Is there anything we can do to stop it?
A: The terms of your IC agreement should cover these situations. Otherwise, transfers become a free-for-all in which either party tries to keep or move the bookings, as the case may be.
Assuming that your agreement is silent on the subject, here is my advice: Legally, the agency that procured the sale is entitled to the compensation for the sale. The sale is considered made when the deposit is taken, so you are legally entitled to the commission on the sale, even after a transfer.
So if you suffer a really major loss that justifies incurring substantial legal fees, you could probably successfully sue your former IC and the new host for your share of the commissions. However, I recognize that in the vast majority of cases, the amount in controversy will not be enough to justify a lawsuit, so you probably need to try to negotiate an equitable settlement.
You could offer to cooperate in the transfer if the ex-IC and the new host jointly agree to remit to you what would have been your share of the commission once the new host receives the commission. Conversely, if you receive the commission after the transfer, you would send the IC what would have been their share.
In most cases, after the transfer, the supplier is going to send the commission to the new host, notwithstanding the fact that you are legally entitled to it. The beauty of the agreement I describe is that your agency will probably be the net beneficiary, as supplier payments to the new host will probably exceed what you could collect.
You can also provide that each host will provide the other with a monthly accounting of what has been collected. A cooperative agreement will probably cut down on cancel-and-rebook activity.
Ideally, a well-drafted IC agreement should already provide these cooperative terms, and then you would need the new host to ratify the terms. If your agreement doesn’t, you can try to amend it to avoid potential acrimony.
Instead of such an agreement, ICs sometimes try to rely on clauses stating that clients solicited and secured by the IC are the property of the IC. Similarly, there may be a clause stating that the old host agrees not to solicit the IC’s clients. Neither of these clauses addresses the transfer situation, as the issue is not whose client it is but rather to whom the particular booking belongs.
