Get It In Writing!

If you work as a home-based independent contractor selling travel, it is essential that you have a written agreement with your host agency in order to avoid any misunderstandings and to protect both you and your host.

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Some of the things that need to be in such an agreement include the following: a compensation arrangement between you and your host; what expenses, if any, your host will pay on your behalf; whether your host will provide back-up service if you are on vacation or otherwise not available and, if so, at what cost; whether you need errors and omissions insurance; whether customer records belong to you as the independent contractor; whether commissions will be paid by your host on residual sales if you are no longer affiliated with the host; and whether your clients can deal directly with your previous host if you have affiliated with another host.

There are no right or wrong answers as to what should be in an agreement. It needs to be discussed on a case-by-case basis and then set forth in written form. It is essential, for example, that you be covered by an errors and omissions insurance policy.

The premium for inclusion on the host agency’s policy should be minimal, if any, and the parties can negotiate about who pays the premium. But if your home-based business is incorporated, you cannot be added to your host agency’s errors and omissions policy and you will need coverage through your own corporation.

Keep in mind that errors and omissions coverage does not cover issues related to deposits, credit, ticketing and many other activities that arise on a regular basis in the course of travel agency operations. But the coverage will protect you and your host for events that raise significant liability, such as a tour bus going off a cliff or similar incidents in which you might be named as a defendant.

Because a number of travel agents still have Airline Reporting Corp. appointments even though they have abandoned their brick-and-mortar locations, it is not unusual to find home-based agents who have incorporated for tax and liability purposes. If your are incorporated as an independent contractor, it is important to remember that all payments from your host agency should be made to your corporation and not to you as an individual.

While it is common to have a confidentiality provision in any agreement with a host agency, as an independent contractor you need to have language in that document in which the host acknowledges that all of your customers are yours and shall remain yours if the relationship with the host is terminated.

You also should continue to receive residual commissions for some time frame, perhaps three to six months, after the relationship ends for whatever reason. I have seen more problems arise between hosts and independent contractors over this issue than any other, so it needs to be addressed in the agreement. If the host won’t negotiate on this, you should give serious thought to finding another host.

It also is prudent to require that you as an independent contractor make any claims for commissions within 60 days from the date of termination of the agreement. This time frame, which can be negotiated, should help avoid any problems when the claim is made six months, a year or longer after the relationship is terminated. The agreement should also contain a binding arbitration provision to resolve any disputes so the parties can avoid the cost of litigation.

Generally, the agreement should be for one year, with either party having the ability to terminate the agreement without penalty with 15 to 60 days’ notice. The host agency can agree to reimburse the independent contractor for any reasonable, documented expenses. The agreement also should indicate whether expenses should be deducted through commissions, paid through the independent contractor or be refunded to the host on a monthly basis.

A written agreement between you and your host agency can minimize some of the risks inherent in the relationship. Nevertheless, that relationship and the written agreement itself need to be reviewed on a regular basis, at least every year, to determine whether a “win-win” relationship still exists.

There are obvious benefits to long-term relationships in any industry. But if you are not in a win-win situation with your host agency, it might be time to move on. A well-written and conceived agreement, reviewed by your attorney, will make that process much easier.