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Below is a brief overview of the most important features of commercial representatives and how they differ from commercial agents. Should you have any queries or require further information on this topic, please do not hesitate to contact our office, we would be delighted to assist you.
1. THE CONCEPT OF A SPECIAL EMPLOYMENT RELATIONSHIP:
A special employment relationship is deemed to exist where individuals take part in commercial transactions on behalf of one or more employers, without bearing the risk associated with those transactions. Traditionally, commercial representatives have been included within this category.
2. KEY CHARACTERISTICS:
1.- They are natural persons (individuals), not legal entities.
2.- They provide their services personally and directly.
3.- They are required not only to promote transactions but may also be authorised to negotiate or conclude the transactions in which they participate. This authority may or may not require subsequent approval or confirmation by the employer.
4.- In exchange for remuneration, their activity consists of promoting and arranging, on behalf of one or more employers, all types of commercial transactions: sales, purchases, or exchanges of goods or services in the market.
5.- They do not bear the risk of the transactions they promote and conclude, that is, they are not liable for bad debts or failed operations.
6.- This activity may or may not include the distribution or delivery of the goods subject to the transaction.
3. EXCLUSIONS:
The following are excluded from this special employment relationship:
1.) Workers who, even if engaged in promoting or arranging commercial transactions on behalf of the same company, do so on the company's premises or have their workstation there and are subject to the company's working hours.
This special employment relationship is distinguished from an ordinary employment relationship by not being subject to the company's working hours, by being carried out outside a fixed workplace, with a significant degree of independence and without being tied to any specific working day or schedule, and by the absence of representation on the company's Works Committee or Staff Delegates.
2.) Those who, as owners of an autonomous business organisation (one with its own premises and staff), engage in promoting or arranging commercial transactions.
3.) Commercial agents:
The distinction between the special employment relationship (commercial representatives) and the commercial relationship (commercial agents) lies not so much in whether or not the party guarantees the successful outcome of the transaction, but rather in the presence or absence of subordination.
Subordination is considered to exist, and therefore an employment relationship, when a person engaged in promoting commercial acts or transactions on another's behalf, or in promoting and concluding them in another's name and on another's account, is unable to organise their professional activity or the time devoted to it according to their own criteria. It exists where, in the course of promoting and arranging commercial transactions on behalf of a company, the person follows that company's instructions regarding pricing and payment terms, reports back on transactions, provides personal services, does not guarantee the successful outcome of transactions, and requires the company's approval.
A commercial agent is regarded as a commercial (rather than employment) relationship by virtue of their character as an independent intermediary. The fundamental distinction between a commercial agent and a commercial representative lies precisely in that independence or autonomy enjoyed by the agent, which the representative does not have. Even where the agent does not assume the risk and reward of the transactions in which they participate, the relationship may still be classified as commercial in nature, provided the agent enjoys independence with regard to schedules, routes, distribution criteria, pricing, methods of placing orders and concluding contracts, and so on.
Independence exists where a person who, on behalf of one or more companies, is engaged in promoting and concluding commercial acts or transactions, carries out that activity on an independent basis, meaning they are free to organise their professional activity and working time according to their own criteria, without being subject to the direction of the company on whose behalf they act.
This does not mean that the commercial agent is under no obligation to report back, nor that they cannot be subject to general instructions from the principal, provided those instructions are limited to matters relating to the commercial product itself (pricing, product identification, etc.). An agent may even receive instructions regarding price without this giving rise to a relationship of dependency; such instructions may cover sales and marketing conditions such as: financial discounts, payment terms, revocable credit facility offers, seasonal promotional products, volume bonuses, promotional campaigns, commission on invoiced sales, and so on.
By contrast, a commercial representative may receive not only the same kind of 'general' instructions that an agent might receive, but also detailed guidance on how to structure their activity, as well as monitoring and supervision measures.
The following are regarded as characteristic indicators of an agent's independence: no entitlement to paid leave, flexibility over working hours, and the absence of rights typical of an employment relationship.
4. Insurance agents and brokers are also excluded from the special employment relationship category.
5. Medical sales representatives, whose activity consists solely in providing information about products to medical professionals, who then prescribe them to patients without purchasing them directly.
6. ONCE lottery ticket sellers (ONCE being the Spanish National Organisation of the Blind), whose employment relationship is considered an ordinary one rather than a special employment relationship of the type applicable to commercial representatives.
7. Non-banking correspondents who engage in the collection of bills of exchange and negotiable instruments, activities that are inherently commercial in nature.
4. RIGHTS AND OBLIGATIONS OF THE PARTIES
The special employment relationship of a commercial representative must be formalised in writing. The representative enjoys the same rights and obligations as those arising from a general employment relationship; however, they must also fulfil the following additional obligations:
· Carry out the activities necessary to promote commercial transactions on behalf of the principal, following the principal's instructions.
· Conduct promotional activities properly, avoiding any conduct that could constitute unfair competition with other companies or damage the principal's reputation.
· Provide the principal with prompt updates on the execution of transactions.
· Manage the collection of payments for commercial transactions in which they were directly or indirectly involved, and remit to the principal any amounts collected from clients.
· Keep the principal informed of their promotional activities.
For their part, the principal has the following obligations:
· Pay the agreed remuneration. They must also, where applicable, reimburse travel expenses.
· Make available in good time all documents and materials necessary for the representative to carry out their activities.
· Notify the representative promptly of the acceptance or rejection of any proposed transactions, and of any circumstances relating to a transaction that has already been accepted.
· Fulfil, on the agreed terms, all transactions firmly contracted with clients within the agreed timeframes and conditions.
· Inform the representative of any changes that may affect the company's activities, including pricing and contractual terms.
5. KEY POINTS ON TERMINATION OF THE SPECIAL EMPLOYMENT RELATIONSHIP:
Unlike the termination of the commercial agency relationship, the termination of a commercial representative's special employment relationship is governed by general employment law, along with certain specific provisions, such as the possibility of terminating the contract due to a change of territory, and potential compensation for growth of the client base.
This means compensating the commercial representative at a rate equivalent to 45 days' salary per year worked, up to a maximum of 42 monthly payments, where the dismissal is declared unfair.
