© Olivier Le Moal | stock.adobe.com

In the article on the MANAchat covering manufacturers requiring their independent reps to submit data and other sales call information to their CRM platforms, several reps observed that there could very well be some legal considerations affecting the rep’s independent status. In order to get some clarification on that matter, Agency Sales magazine contacted two attorneys that regularly consult with reps.

Gerald M. Newman is a veteran rep attorney and a partner in the law firm of Schoenberg Finkel Newman & Rosenberg, LLC. According to Newman, “While there are a number of factors the IRS considers when determining whether a sales representative is actually an independent contractor rather than a direct employee, the more information the manufacturer insists that the rep provide, such as requiring the rep to submit data to the manufacturer’s CRM platforms after each sales “contact,” that is just one more factor to add to the list to sway the judge or the court to determine that the rep is really a direct employee.

“The rep’s role is to bring sales orders to his principal. Requiring the rep to provide data on each sales contact is way beyond what is necessary. It not only infringes on the rep’s independence, but also forces the rep to open his entire contact list, which is the antithesis of an independent sales representative.”

He adds, “These are both legal and practical arguments for ending the trend of manufacturers requiring reps to submit data to the manufacturer’s CRM platforms after each sales contact.”

Voicing agreement with Newman is Gene Hoff, a principal of Hoff Law, LLC.

According to Hoff, “It’s interesting that while most of the reps that I work with don’t comply with these CRM input requests, those that occasionally do, do it reluctantly. Their principal reason for not doing it is that they view it as a complete waste of time. In addition, this could create an issue with the essential rep-manufacturer employment relationship. Given that we have a very effective sales rep statute here in Minnesota, such a requirement could be used against the principal.”

Hoff goes on to agree with the practice several reps described in the MANAchat in terms of being proactive when it comes to communicating on matters of importance in the territory. “I’ve been told by a number of reps that when one of their principals gets bought out by another, the new management gets really focused on the need for sales reps to fill out reports. If the rep is proactive in that area, then that goes a long way in establishing the trust and rapport that are all part of a strong relationship. By communicating in that manner, you could void those types of requests from manufacturers.”