Host Agency Exclusivity — Is It Legal?
You should be aware that some host agencies will try to tell you that you and they have an “exclusive” relationship — that is, that you must book all your travel through them. Some even include a so-called exclusivity clause in their independent contractor agreement.
To my way of thinking, this violates the spirit of what an independent contractor agreement should be.
The agency wants you to be an independent contractor so they don’t have to carry you on their rolls as an employee, withhold taxes on the money they send you, and be liable for unemployment insurance and a lot of other inconveniences. But when they insist they are your “exclusive” agency they are attempting to control you as they would an employee.
In other words they are trying to have it both ways and that is not fair.
But is it legal? I am not a lawyer, so you should pay no attention to anything I say, but let’s see what a reasonable person (i.e. not a lawyer) can make of this.
Well for starters, the IRS in its training manual for auditors says “whether a worker performs services on a full-time or part-time basis is a neutral fact.” In other words, the IRS considers many factors in determining whether someone is a contractor or an employee and exclusivity is just one factor among many and cannot, by itself, determine whether someone is a contractor or an employee.
A prominent travel industry attorney, Mark Pestronk, opines that an exclusivity clause will probably pass the legal smell test, but he includes a lot of “one the one hand” “on the other hand” caveats. To paraphrase Harry Truman, where can you find a good one-handed lawyer?
A friend who is a lawyer accuses me of having a tendency to confuse what’s fair with what’s legal and, y’know, I’m okay with that. Whatever the “legality” of host agency exclusivity clauses may or may not be, in my opinion they are flat out unfair. End of discussion.
Of course, at the risk of sounding like a lawyer, your opinion might differ.
Host agency exclusivity — your options.
What happens if a host agency you are considering, or one you are already affiliated with, tries to claim “host agency exclusivity”? Your options will differ depending on whether a “host agency exclusivity” clause in in your agreement or not. (You will sign an agreement, won’t you?)
If there is no such clause in your agreement, you can refuse. Or you can simply let them know that you disagree with their position and tell them that you reserve the right to make strategic alliances with whomever you choose, as befits your standing as a true independent contractor. Or you can say nothing, figuring (a) they’ll never know of your other dealings anyway and (b), even if they do, there’s nothing they can do about it (which actually may not be true!).
Of course, you can choose to deal only with one agency, turning away offers from tour operators to deal direct or routing hotel reservations through your agency, even when it’s not absolutely necessary. You might do this just because it’s easier or because you receive a great deal of support and training from the agency for which you feel they deserve your unswerving loyalty. However, you should know that, without specific language in the agreement, you are not bound to do so. In most cases, the outside sales rep’s relationship with the host agency is arm’s length. The agency has little contact with the rep unless and until a booking is made and little direct knowledge of the rep’s activities.
Most outside reps I’ve talked to don’t make much of issue of the matter of exclusivity. Rather they choose a line of least resistance. They go about their business, dealing as they wish, with whom they wish, figuring it’s nobody’s business but their own.
If there is a host agency exclusivity clause in a host agency’s independent contractor agreement, ignoring it becomes something of a problem.
Let’s say you’ve signed such an agreement and have then ignored it, forging direct relations with a number of suppliers. Let’s also say your agency somehow finds out that you are maintaining direct relationships and makes an issue of it.
You can try pointing out that, since you’re an independent contractor, they cannot make such demands on you. You might also assert that you consider the host agency exclusivity clause illegal … unless they want to start paying your health benefits and withholding taxes like they do for their other employees.
Of course, if the agency is really annoyed with you, they could sue you, using the clause in the contract as a basis for that suit. More likely, they could simply decide not to do your ticketing, maybe even withholding some commissions. Most agreements give them the right to terminate the arrangement for whatever reason they choose. Even if you had a basis for legal action in a case like this (and you’d have to review the individual facts with a lawyer to find out), it probably would cost you more to mount a suit than it’s worth. It’s far easier to simply move to another agency for the ticketing you need.
Host agency exclusivity — just say ‘no’
The best way to avoid any of the hassles mentioned above is to have a sound understanding of how the business really works along with a clear idea of what you want and need in a host agency relationship. You also need to read very carefully any independent contractor agreement put in front of you.
If you are uncertain about the meaning of any clause, by all means seek competent legal guidance.
My personal feeling is that you should not sign any agreement that demands host agency exclusivity. Even if you are more than happy to funnel all your business through a single agency, I don’t think it’s a good idea to sign such an agreement.
While you may be happy using a single host and having no direct relationships with suppliers today, who knows how you will feel in a year or two?
You can always ask to have a host agency exclusivity clause struck from the contract, but if they refuse, I’d advise finding a different host.
Again, this is my personal opinion. Your mileage may differ and nothing said here should be construed as legal advice.
You will find all the information you need to protect yourself and become your own boss (not your host agency’s pseudo-employee) in my home study course.