Retirement Planning for Commercial Agents

by Andrew Leach
of DWF LLP

Commercial Agents can
benefit from substantial
payment when their agency
contracts come to an end –
and usually this entitlement
remains when an agent retires.
As a result, if an agent properly
plans his retirement he could
be in for a large lump sum
payment when he gives up
work.

The right to compensation or an indemnity
arises under the Commercial Agents (Council
Directive) Regulations 1993 (“Regulations”).
When an agent terminates the contract
himself, or can no longer perform his role, by
“reason of age, infirmity or illness…in
consequence of which he cannot reasonably
be required to continue his activities” he will
usually be entitled to an indemnity or
compensatory pay-out.
The payment can be up to 3 or 4 times the
annual commission. However, the Regulations
do not set out when an agent will reach an age
where he “cannot reasonably be required to
continue his activities”, and in the UK, there is
no default retirement age.
In one case, Abbot v Condici [2005] 2 Lloyd’s
Rep 450, the Court held that although there
might be exceptional cases, in general an
agent could not reasonably be required to
continue his activities beyond what was
recognised as his appropriate retirement age.

The Court found that age of 65 was a
reasonable age for an agent to retire and
remain entitled to a post-termination
payment under the Regulations, as the age of
65 was “embedded as a retirement milestone”.

The case was decided before the default
retirement age of 65 was abolished in April
2011 and it is questionable whether this will
remain the case.
That said, the abolition of the retirement age
was intended to prevent discrimination by an
employer based on a person’s age by
preventing the employer from dismissing
them solely because of their age. Clearly, that
is not directly analogous to a situation where
an agent wants to retire because of his age.

Clearly whether an agent can reasonably be
required to continue his activities depends
entirely on the circumstances; if an agent is
required to travel the length and breadth of the
country every week it may be reasonable to
decide he cannot reasonably be expected to
do so if he is 70 years old; on the other hand,
what happens if the agent makes one call a
week not far from his home?
Clearly from an agent’s perspective, he will
wish to retain his right to indemnity or
compensation and retire at a reasonable age
to enjoy the benefit of his work throughout his
years.
From the principal’s perspective, they need to
consider how they may reduce or even avoid
the risk of paying out compensation or
indemnity to an agent who is approaching
retirement age.

For both principals and agents, careful
consideration is required of the best way to
protect your position. DWF’s commercial
agency team is highly specialised in advising
on issues arising out of the Regulations. We
take a strategic approach and provide practical
and commercial advice. We have extensive
experience in acting for principals and agents
in relation to issues arising upon the
termination of the agency contract, including
dealing with contested claims, liability and
valuation issues.
We act on all values of claims across all sectors
on behalf of both agents and principals and
have substantial experience of multi-million
pound claims as well as claims involving
technical issues such as choice of law and
jurisdiction; the applicability of specific
regulations; how the Regulations apply in the
context of “super-agents” and “sub-agents”;
and the calculation of indemnities. If you
would like to discuss any of the issues raised in
this article please contact Andrew Leach at
andrew.leach@dwf.co.uk or by telephone on
0845 404 2564.

One Snowhill

Snowhill Queensway
Birmingham B4 6GA
Tel: 0121 212 2620
www.dwf.co.uk

Andrew Leach

Disclaimer: This column does not contain legal advice and is for general
guidance only. Agentbase, DWF LLP and the writer accept no liability in
connection with the general guidance given in this column.
Please ensure that you obtain legal advice before acting in reliance upon
anything in this article. For example, please be clear that the answers given
in this column may not cover all possible angles, aspects, relevant
considerations and/or points of law and so that all or any information
which is given above needs in every instance to be referred for legal advice
for clarification and amplification, before being relied upon

 

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