You just received a representative contract from a potential new principal. The product line looks like a winner. You read the contract. You look at the territory, the commission rate, the length of the contract, and the reasons for early termination. You may also look to see if you are to be compensated if the principal undergoes a change of control. Hopefully, you look to see if there is a non-competition provision that prevents you from selling competitive products while the contract is in effect and after it ends.
Another provision that should be carefully read is the one that … Read the rest
A manufacturers’ representative calls me. He tells me that he began representing a manufacturer when it started 25 years ago. Joe had called him that morning. Joe is the son of good old Marty, the founder and owner of the company. Joe is fresh out of business school, and decided to take the company’s sales operations direct.
“I gave this company 25 years of my life, I took it from nothing to five million a year in my territory and now they’re firing me. How can they do that?”
I asked him to e-mail me his representative agreement and he … Read the rest
The following article is reprinted with permission from PTRA (Power-Motion Technology Representatives Association), www.ptra.org.
This year, we received a phone call, like many we have gotten over the years, from an owner of a profitable independent manufacturers’ representative organization. He was serious and concerned. He explained that his company has several salespeople, a small support staff, and one manufacturer that accounts for almost 70 percent of its annual commissions. That manufacturer had recently been acquired by a larger company in the same industry and the majority of the acquiring company’s territories were covered by a direct sales force.
In my … Read the rest
It’s a problem that faces small and large agencies alike. A principal wants to control every move the rep makes. Your regional manager starts telling you how many people to hire and sometimes whom to hire. He wants onerous frequent reports about how you spend your time, and he wants more of that time. In short, the company wants to treat you as an employee.
In the United States, most workers are either 1099 independent contractors or W-2 employees. But there is no such thing as a “1099 employee” or a “W-2 contractor.” Misclassification of a sales representative as a … Read the rest
If you are sued or if you are thinking about suing someone, you should know more than you have learned from watching Law and Order or TheGood Wife. First off, it will probably take three years not sixty minutes. Second, every law school graduate is not a trial lawyer. We call trial lawyers litigators, gunslingers or sometimes egomaniacs. The lawyer who helped you buy your house, wrote your will, or did your taxes has probably only seen the inside of a courtroom on a tour of city hall.
Whether you’re suing or being sued, you should have … Read the rest
Some manufacturers’ representatives have acted as though they were the sharecroppers of our industrial system. Like sharecroppers needing someone else’s land to work, the rep needs someone else’s product to sell. Like sharecroppers whose survival is dependent on weather, insects, and other things beyond their control, the rep faces the ups and downs of its market, manufacturers that allow the products it sells to become obsolete, backorder problems that reflect badly on the rep and other factors beyond its control.
And too often, reps, like sharecroppers, take what is handed to them without questioning. Too many sign agency contracts without … Read the rest
I was troubled by the article “Representative Agreements Must Be Rewritten Annually” in the November 2006 issue of Agency Sales. The thrust of that article was that agency contracts with manufacturers should be limited to one year in order to eliminate possible litigation. The article accepts the idea that representatives are generally terminated because of poor performance and that by revisiting the relationship each year, business divorces can be easy and painless.
Our law firm has represented manufacturers’ representatives for almost 30 years. Over the years we have been involved in innumerable situations where a representative feels that it … Read the rest
A number of recent court decisions dealing with manufacturers’ representatives point out the dangers lurking in failure to understand a contract with your principals.
Chase v. Matsu Manufacturing was decided by the 6th Circuit Court of Appeals in August 2005. J. Michael Chase was in the purchasing department of General Motors for 28 years. After retiring from GM, Chase became a sales representative in the automotive supply business. He became a sales rep for Matsu, a Canadian manufacturer that hoped to use Chase’s experience and relationships to sell product to GM. Despite Chase’s experience and excellent bargaining position, … Read the rest