How is compensation for clientele calculated?
Article 28 of Law 12/1992, of May 27, on Agency Contracts provides that after the termination (for any reason) of the agency contract, the agent who has brought new clients to the entrepreneur or has substantially increased the volume of sales to previous clients will be entitled to compensation if it continues or can continue to produce substantial benefits to the entrepreneur. Said compensation may not exceed the average annual amount of the remuneration received by the agent during the last five years or, if the duration of the contract had been less than one year, during the entire period of its duration.
In recent months, legal practitioners have noticed that the crisis caused by COVID-19 is leading many manufacturers and companies to terminate agency contracts that linked them to their agents, trying in many cases to reduce (when not eliminate) the compensation for clientele to which the agent is legitimately entitled after years of work for the brand.
One of the ways most used by manufacturers is to request the termination of the contract alleging a hypothetical and prior breach by the agent, under the provisions of art. 30 a) of the Agency Contract Law, trying to avoid paying the agent the compensation to which he would be entitled. Said practice is totally abusive and lacks any legal protection based solely and exclusively on the contractual position of force of the manufacturer with respect to the agent. However, the agent who is subjected to this type of practice has the right and the possibility of claiming from the manufacturer or employer the payment of the compensation to which he or she is entitled, and it must be the employer who proves the alleged non-compliance in court. to be exempted from the obligation to indemnify the agent.
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Causes for non-compliance with the Agency Agreement
One of the most alleged causes of non-compliance ever (and more so in recent months due to the crisis caused by COVID-19) by companies to terminate a contract of agency without paying the corresponding compensation to the agent is the decrease in its sales. However, as the jurisprudence has declared (among others, the recent Judgment of the Provincial Court of Girona of May 18, 2020, resolution no. 511/2020), unless the decrease in the Sales cannot be considered as non-compliance even if this is a direct consequence of incorrect business management, and an unfair action and contrary to good faith on the part of the agent must mediate so that it can be classified as such.
Another point of contention is usually the quantification of the compensation to be paid to the agent who sees his contract terminated, it being a common practice for companies to try to reduce the amount as much as possible.
Case law
In this regard, it is necessary to indicate in the first place that the agreements contained in agency contracts by which the agent waives compensation for clientele to which he may be entitled they are null and void as they are contrary to an imperative rule, namely, art. 28 Agency Contract Law. This was stated by the Supreme Court in its Judgment of January 27, 2003 where, interpreting articles 3.1 of the Agency Contract Law and article 19 of Council Directive 86/653/EEC of December 18, 1986 , states that:
“The so-called compensation for clientele, regulated in art. 28 Agency Contract Law (…) is unavailable by application of art. 3.1 of the special Law itself, which provides that its precepts have an imperative nature unless they expressly provide otherwise, which does not happen with respect to said compensation”.
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Once the origin of the payment has been determined and the nullity of any resignation agreement in this regard, the Supreme Court has ruled in its Judgment of October 14, 2020 affirming that for the determination of the same, it will not be possible to take into account only the commissions in the strict sense that the agent has been receiving for his activity, but that all amounts received by the agent for the service must also be included in the concept of “remuneration”. of other services such as, for example, the remuneration that could be received for the provision of an after-sales service as a result of a contractual obligation.
Likewise, the Supreme Court has reaffirmed the inadmissibility, as it is contrary to the provisions of the Agency Contract Law, of any reduction in compensation for clients based on the possible additional ease in the commercialization of the products that a high reputation in the market of the brand could imply. In other words, the fact that the good reputation of the marketed brand may provide added help or ease to the agent’s work of attracting clients does not entail, in any case, the right of the company to reduce the compensation for clientele.
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