Agent and/or Area Manager? A brief overview.
When a company intends to organise its sales network in a structured manner, it often needs to rely not only on a plurality of agents, but also to ensure that they are among themselves organised hierarchically and are coordinates by a supervising person: the area manager.
The function of coordinating sales agents is often assigned by the company to a Area Manager (also known as area manager or area coordinator/supervisor), who is entrusted with a wide variety of tasks: he/she may be required to support the agents at the beginning of the relationship and supervise their work; coordinate the sales network in the assigned area, which may be composed of both agents and direct salespeople or resellers; or select and recruit agents, thus creating/implementing a distribution network within the assigned area.
Given the multiplicity of functions that can be attributed to an Area Manager, this figure is not easily framedMoreover, despite the highly strategic role it plays, the importance of properly delineating the relationship is frequently underestimated, with an awareness of what could be the risks associated with an ill-considered management.
1. Area manager: self-employed or commercial agent?
Before starting to establish the relationship, it should be clear how one intends to include this figure in the company's distribution network: employee, self-employed, or commercial agent?
One should ask oneself these questions not only before contracting the collaboration, but also during the development phase: it often happens that an Area Manager, classified as an agent, after the relationship is closed, claims the subordinate natureasserting (and proving) that the collaboration has always presented the typical characteristics of employment[1]. In the event of a dispute, it is common ground that, regardless of what the name iuris which the parties conferred on the relationship, the judge is called upon to frame it according to the manner in which the parties actually 'experienced' it (on this point cf. differences between agent and employee).
It follows that the creation of a hierarchical pyramid structure, structured in such a way as to strongly affect the Area Manager's autonomy of choice, may entail the risk that a (often unwanted...) relationship of a subordinate nature is established between the parties.
Among the elements characterising the subordinate nature of cooperation, there is, for example, the imposition on the Area Manager of excessively stringent visiting obligations, the giving of constant instructions on the management of the agents coordinated by him, or an obligation to report very frequent.[2]
The Court also held to be in the nature of a subordinate employment relationship, that of an Area Manager classified as an agent, but who performed almost no direct promotional activity, limiting himself to coordinating and directing the agents subordinated to him. He was remunerated with a monthly fixed sum, qualified as an advance on commissions, against commissions that were in fact practically nil (Lire 5,400 in 10 months of activity).[3]
In contrast, the Court ruled out the subordinate nature of the relationship of a coordinator of a group of commercial agents, where the parties had agreed on a monthly advance payment, to be balanced with the commissions actually accrued, in addition to a share of the commissions that the commercial agents of the group under his coordination would have accrued. The Court recognised in this structure both the actual activity of coordination, but also that of promotion, typical of the agent, with the allocation to the latter of a
"risk in the activity of the [agent]represented by the insecurity of commission level. "[4]
If the typical characteristics of subordination briefly set out above do not exist, it must first be clarified that the activity of Area Manager is not incompatible with that of commercial agent[5]However, if he only performs the activity of coordination/supervision, without actually promoting sales in the area entrusted to him, he cannot be classified as an agency.[6]
This principle is constantly reaffirmed by case law, which states that the activity of promoting the conclusion of contracts, which constitutes the agent's typical obligation under Article 1742 of the Civil Code, cannot consist in a mere activity neither of mere control, nor of "propaganda"even if this results in an increase in sales (see also: Obligations of the Agent. Is a simple propaganda activity sufficient?). On this point we read:
"The activity of promoting the conclusion of contracts on behalf of the principal, which constitutes the agent's typical obligation, [...]. cannot consist of a mere propaganda activityfrom which an increase in sales can only indirectly be derived, but must consist in persuading the potential customer to place orders for the principal's products, since it is precisely with regard to this result that the agent is awarded the remuneration, consisting in the commission on the contracts concluded through him and successfully concluded.[7]
In any event, promotion activity should not be understood solely as the activity of seeking out the end customer, who may also have been acquired on the principal's instructions (or in any other way),
"provided there is causal link between the promotional work performed by the agent vis-à-vis the client and the conclusion of the transaction to which it relates the request for commission (Applying these principles, the S.C. upheld the contested judgment that had excluded the existence of an agency contract between the parties, given that the appellant had the task of creating a commercial network by recruiting and training agents, as well as carrying out propaganda and support activities for them, without, however, having any influence on the individual deals concluded by the agents themselves with customers). (Cass. Civ. 2018, no. 20453)
Therefore, strictly speaking, since the activity of controlling and coordinating agents is not an '.promotion"of concluding contracts, the Area Manager who only performs that task cannot be considered to be a commercial agent.[8] In order to classify the Area Manager as a commercial agent, he will have to combine coordination activities with the promotion of business directly, i.e. in cooperation with the agents assigned (or selected by him);[9] It will certainly be easier to consider it an agent where the second activity is, if not predominant, at least significant.
2. The ancillary nature of the office of area manager.
That being said, in the event that the Area Manager predominantly carries out promotion activities and is therefore classifiable as an agent, the coordination activity has accessory naturethan that of agent. On this point, the Supreme Court has ruled on several occasions: [10]
"the relationship between agency contract and ancillary supervisory assignment must be reconstructed through the scheme of the negotiated link, with unilateral dependence bond. "
Given the ancillary nature of the coordinator's relationship with respect to that of an agent, one of the main consequences of this unequivocal interdependence is that in the event of termination of the main contract (agency), the ancillary contract (coordination) will follow
"the fate of the main contract to which it accedes [11][...].
Conversely, in the event of revocation of the ancillary contract (i.e. that of coordinator),
"precisely because it relates to a contractual relationship distinct from that of agency, it cannot have any effect on the latter, either from the point of view of the alleged failure of the revoking principal to fulfil its obligations under the agency contract, or from the angle of an alleged lack of interest on the part of the same principal in the continuation of the agency relationship[11]. "
Direct (and far from secondary) consequences of the accessory nature of the Area Manager position as opposed to the agency contract are essentially two:
- the parties may agree not to make the revocation of this assignment subject to any notice period (which, however, is expressly prohibited for the agency contract (cf. Early termination of an agency contract. How is the indemnity for lack of notice calculated?);
- i fees accrued by the Area Manager are not of a commission nature and, therefore, do not fall within in the calculation for quantifying theseverance pay.
2.1. The obligation to give notice and the corresponding indemnity.
With reference to theobligation to give notice (and consequent entitlement to compensation for loss of notice) in the event of termination of the appointment as Area Manager only, the Court:
"ruled out the possibility of a general rule of the system which, in contractual relationships of indefinite duration, would require the grant of a notice period (or the payment of the indemnity in lieu of notice) in every case of termination by one of the parties, unless there is a contractual derogation excluding such an obligation on the withdrawing party", and that this is to be inferred from the fact that only for some typical types of long-term contracts does the law make the validity of the termination conditional on the other party being granted a period of notice, and subject, in any event, to the assessment of whether the duties imposed by Articles 1175 and 1375 of the Civil Code in the performance of the contract."[11]
2.2. Area managers and quantification of severance pay.
As for theseverance pay:
"the claim [...] that the rules laid down in Article 1751 of the Civil Code for the basic agency contract should be applied to the ancillary assignment has no legal or even contractual support."
The ancillary nature of this relationship, from which a compensation non-contributory, which does not affect either the notice allowance or the severance pay, is also indirectly apparent from a reading of the AEC. Article 6 para. 4 of the AEC Industry 2014, in fact states that:
"In the event that the agent or representative is entrusted with the task of coordinating other agents in a certain area, provided that this is specified in the individual contract, a separate commission or a specific additional remuneration, in non-commissionable form, shall be established."
Article 4(11) of the AEC Commerce 2009 extends this regime to all ancillary activities carried out by the agent:
"In the event the agent or representative is entrusted with the continuous task of collecting on behalf of the principal, with the agent's liability for accounting errors, or of performing complementary and/or ancillary activities with respect to the provisions of ss. 1742 and 1746 of the Civil Code, including those of coordinating other agents in a certain area, provided that they are specified in the individual contract, a specific additional remuneration, in non-providential form, shall be established."
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[1] See on this point Cass. Civ. 2004, no. 9060.
[2] On this point see Perina - Belligoli, Il rapporto di agenzia, G. Giappichelli Editore, 2014, p. 21 et seq.
[3] Cass. Civ. 1998, no. 813.
[4] Cass. Civ. Cass. 2002, no. 17534.
[5] Cass. Civ. 1990, no. 2680 "The agency relationship - which is of an autonomous nature - is not incompatible [...] with the agent's obligation to visit and instruct other employees, with the fact that the principal has several agents organised hierarchically, with the principal's obligation to reimburse certain expenses incurred by the agent, nor with the agent's obligation to report daily to the principal."
[6] In doctrine on this point see Bortolotti, Distribution Contracts, Wolters Kluvers, 2016, p. 109. See also Tassinari&Sestini, Area manager in sales agent format, are you in?
[7]Tribunale Vicenza, 22.3.2018, concurring also Cass. Civ. 4.9.2014 no. 18690.
[8] In Doctrine, Bortolotti, op. cit, p. 109.
[9] Cass. Civ. 2007, no. 18303 "Although the "nomen iuris" assigned by the parties to a contract is irrelevant, nevertheless for the purposes of reconstructing the intention of the parties, according to the rules of Art. 1362 et seq. of the Civil Code, the qualification is also part of the words used and contributes to offering elements for reconstructing the common intention of the contracting parties.
In particular, since it is necessary to verify the correspondence of the "nomen" with the negotiated content, both the agent's carrying out of the promotional activity by availing itself of other coordinated and supervised agents and the lack of a formal and express indication of the area in which the agency is to be carried out must be deemed compatible with the legal notion of agency, where such indication is otherwise inferable from the reference to the territorial area in which the parties operate at the time of the establishment of the relationship. (Rejected, App. Trieste, 8 October 2004)"Cass. Civ. 1998 no. 813; in Dottrina Perina - Belligoli, op. cit., p. 22.
[10] Cass. Civ. 2005, no. 19678.
[11] Cass. Civ. 2018, no. 16940; Cass. no. 14436, 2000.
