© rtype | stock.adobe.com

After representing commissioned sales representatives for many years, I have come to recognize that perhaps the most daunting task facing a sales representative organization when presented with a serious legal issue is simply: “What in the heck do I do now?” The goal of this article is to provide a brief primer on how to be proactive, so you can avoid having to ask this question.

First and foremost, know your state law. So many reps think they are powerless, with no rights, and that’s simply not true. More than 35 states have enacted some kind of sales rep legislation. These acts were born out of legislative recognition that there is a gross disparity in bargaining power between reps and manufacturers. As a result, most states have taken some action to level the playing field. You can locate applicable rep laws on the internet, and you may access them from the MANA member area at https://members.MANAonline.org/commission-protection-acts/. Understand, these are powerful laws.

• Many mandate that you be given a written contract.
• Most require the prompt payment and accounting of commissions.
• Many impose a significant penalty for non-compliance that can include reimbursement of attorneys’ fees and costs.
• Some place significant restrictions on how a sales representative is terminated.

Point being, forewarned is forearmed.

Locating Attorneys

Next, recognize and embrace the fact that you know little about the legal field and profession. So, before you have a legal problem that might bite you, find an experienced attorney you feel comfortable with before you have an issue. The key is to find an attorney who has experience in the sales and distribution business and is committed to giving you the tools to make a good business decision.

“But how?” you might ask? Yellow Pages? Absolutely not! To find a knowledgeable attorney, contact other reps and trade associations. The MANA attorneys’ forum is stocked with experienced and knowledgeable folks. If there isn’t one who works in your state, call your business attorney or estate planner or even a lawyer-friend who doesn’t work in the area, and ask them to do a simple Westlaw search for sales representative cases in your state (you should pay for this service), but this will very likely produce the names of some attorneys who have handled sales representative cases. The whole point here is, watch out for the guy who is your neighbor or your nephew fresh out of law school and has no experience in the sales and distribution business. Again, you don’t want to pay for your lawyer to go to school!

Once you have the name of some experienced lawyers, make an appointment and ask to come in for a brief consultation. Any good attorney should not mind being auditioned. You should be prepared to pay for at least a half-hour of the lawyer’s time — it’s worth it! Before the meeting, assemble some questions about legal and business issues you have confronted in the past, to get a gauge on the attorney’s experience or approach to business problems. The purpose of the interview is to form a relationship with an experienced attorney with whom you feel comfortable and with whom you can communicate. Believe me, trying to find that person in the heat of a business crisis is as difficult as it is risky.

Assemble Documents

Then, when you have a pressing legal problem and need to consult with an attorney, to get the most out of that consultation put together and send them all directly relevant correspondence, reports and contracts in advance of the meeting. If you decide to engage the civil justice system, it is critical that you assemble for your attorney all documents relevant to your business relationship and the dispute. You should assemble electronic records in their native format, invest in inexpensive software to extract relevant phone text messages, have a copy service make scanned .pdf copies of any relevant hard documents. Once assembled, put it all on a stick drive or portable hard drive to ensure they are preserved against computer failure. Yes, this is likely a daunting task, but trust me — the earlier in the process you do this, the better armed your attorney will be, and you will be happy you invested the time.

If you live in a state without sales representative regulations — organize! While it may not seem like it, this is a critical part of preparing for any legal issue.

Again, most reps think they are powerless, but sales reps in states like Minnesota have successfully organized and lobbied for the passage of strong legislation limiting a manufacturer’s ability to simply cut a sales rep out of a territory. The Minnesota statutes (see article on the Minnesota statute in this issue of Agency Sales) forbid a manufacturer from firing a rep with a phone call, without some substantial problem with that rep’s performance, and then only after 90-180 days’ prior notice. Members of this forum (Gene Hoff, Esq.) have been back to the Minnesota State Legislature twice in the past three years and successfully amended this statue. Many legislators (on both sides of the isle) actually view this as small business protection legislation and are willing, if not eager, to lend their support. This movement is spreading slowly. For example, Wisconsin has adopted similar legislation. Because the Minnesota statute covers Minnesota “residents,” our clients in neighboring states who have some business here have been incorporating in Minnesota — thereby arguably becoming “residents” — to take advantage of this law.

MANA welcomes your comments on this article. Write to us at [email protected].