The Big Split

A successful relationship between a host travel agency and an independent contractor consists of a written agreement and an open flow of communication between both parties. Both sides have obligations to the other: The host agency needs to make certain the independent contractor has the necessary skills, training and support to be successful. The independent contractor has an obligation to enhance sales and revenue while adhering to the professional standards of the host agency.

Unfortunately, there are times when the relationship between these parties becomes strained. When these circumstances arise, I generally recommend that the relationship be terminated as soon as possible, with the understanding between the parties that clients will be protected.

In my experience representing travel agencies for many decades, I have witnessed horror stories involving the relations between host agencies and independent contractors. Fortunately, in most of these instances, the clients were not aware of the problems.

Several years ago, I had a host agency client who got into a dispute with an independent contractor about commissions, including the sharing of override payments. The host agency refused to pay the independent contractor what that individual believed was due under the verbal agreement on override commission payments.

In my experience, override commission payments are generally not included in any calculation of commissions between host agencies and independent contractors. Ultimately, the independent contractor filed suit against the host agency in small claims court, and the case was settled prior to trial with the agency paying the disputed amount.

This problem could easily have been avoided if there had been a written agreement between the host agency and the independent contractor. In this case, I had recommended that the host agency have written agreements with its independent contractors, but the agency never followed my recommendation.

Thus, there was no written documentation when the problem occurred. Unfortunately, it took such a dispute for the host agency to begin using written agreements with its independent contractors to minimize or eliminate any disputes over commissions in the future.

A recurring area of disagreement between host agencies and independent contractors also involves trips under deposit when the independent contractor terminates the relationship with one host agency and affiliates with another host. I believe that the agency of record at the time the reservation is created is entitled to the commission. In my experience, many vendors will pay a commission to the new agency, even if the booking was transferred without the consent of the host agency.

In some instances, the independent contractor actually has canceled the reservation and rebooked it with the new agency, particularly in circumstances where there was no change in price for the client. This situation is probably the most common that I encounter. Again, this can easily be prevented by setting forth in the written agreement between the host agency and independent contractor what happens to reservations under deposit when an independent contractor becomes affiliated with another host.

While the host agency agreement is subject to negotiation between the agency and the independent contractor, I recommend that in these circumstances, the existing agency allow the booking to be transferred with the understanding that the commission will be split between the two agencies. The independent contractor is then paid by the new host agency of record.

I am also aware of at least one situation in which an independent contractor was very successful in selling spring school trips to several destinations throughout the country. After several successful years, however, the independent contractor, for reasons unknown, accepted deposits from the various groups and never forwarded those deposits to the vendors. The trips ultimately were canceled and the independent contractor ended up facing criminal charges. Unfortunately, the host agency was also blamed and its business suffered dramatically.

The situation could easily have been avoided had the host agency required that the deposit be sent directly to it as opposed to the independent contractor. However, in this case, there was a track record of the independent contractor having successfully accepted deposits on her own and thus there were no warning signs.

Nevertheless, I strongly recommend that all deposits received by independent contractors be remitted through the travel agency to the vendor to insure that payments have been made and that clients are protected. Again, the moral of this story here is that in order to avoid disputes, host agencies and independent contractors need to effectively communicate the terms of their relationship in a written agreement.