Employment Law

If a dispute arises between sales representatives and their companies, it is usually about money. As a rule, the so-called sales agent compensation and commission payments are discussed. If these disputes end unfavorably, it can be really expensive for the sales agent and even endanger the company’s existence. The commercial agent compensation is the remuneration that is paid at the end of the contractual relationship between the commercial agent and a company in order to compensate for the advantages that the commercial agent has brought to the company. As is well known, commercial agent compensation is regulated in Section 89 b of the Commercial Code and is regularly the subject of labor law proceedings.

Dr. Tim Banerjee, lawyer and partner at Banerjee & colleagues, the law firm for financial services law from Mönchengladbach, conducts such proceedings regularly and observes: “There are always disputes between independent commercial agents and their companies that end up in court. As a rule, it is about money, and usually in the context of the termination of the independent commercial agent.” This is particularly often the case when the company terminates the contract with the independent commercial agent (without notice). Then companies often tried to deny the commercial agent compensation.

“But independent sales representatives don’t have to accept that,” emphasizes Dr. Tim Banerjee and refers to a decision with which the Cologne Higher Regional Court (01.03.2021, Ref.: 19 U 148/20) clearly positions itself on the side of independent commercial agents in disputes about commercial agent compensation after termination without notice and says something about the rights of the commercial agent made this situation clear. Dr. Tim Banerjee conducted the proceedings for the plaintiff insolvency administrator.

The plaintiff was sentenced to 180 daily rates for tax evasion. His client, an insurance company, then terminated him without notice and did not want to pay the compensation after 14 years of work. Both the Cologne Regional Court in the first instance (ref.: 89 O 21/20) and the appeal court approved the termination without notice. However, the district court’s ruling that there were no reasons that could lead to the compensation being canceled remained controversial. The insurance company was therefore ordered to pay six figures. The Higher Regional Court confirmed this decision. In particular, if a previous conviction or other action has nothing to do with the contractual relationship, the compensation may not be forfeited.

“In its reasoning for the judgment, the Cologne Higher Regional Court clearly points out that the refusal of the commercial agent compensation presupposes that the company has terminated the contractual relationship and that there was an important reason for the termination due to culpable behavior on the part of the insurance agent. The reasons must be so serious that the continuation of the commercial agency contract until the end of the normal notice period or until the agreed termination of the contract cannot be expected. As part of a balancing of interests, it is also important to determine whether the continuation of the commercial agency relationship is really unreasonable for the company. The principle of proportionality must be taken into account,” says Dr. Tim Banerjee summarized the decision.

He makes it clear that an important reason is required for every extraordinary termination. This occurs if, taking into account all the circumstances of the individual case and weighing up the interests of both parties, the company cannot be expected to continue the employment relationship until the agreed termination of the contract or until the end of the normal notice period. In addition, the extraordinary termination must be preceded by a warning. It can only be omitted in exceptional cases. Sales representatives should pay close attention to these labor law regulations.

“The judgment of the Cologne Higher Regional Court and the rejected appeal by the insurance company are highly relevant for disputes about the loss of the compensation claim. The Cologne Higher Regional Court has clarified for the first time that the reasons for termination must relate to the contractual relationship and should not relate to the commercial agent’s private life or lifestyle in order to justify a loss of the claim to compensation. The chances for sales representatives to receive the sales representative compensation even if the client terminates their contract without notice are generally very high,” comments Dr. Tim Banerjee.