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Explanatory Notes
Telesales Agreement
Introduction: This short letter based agreement appointing a telesales representative is drafted from the company's interest. Please note that it is NOT suitable for the sale of products the sales of which are regulated by the Financial Services Authority ("FSA") e.g. savings plans, mortgages, investments or any form of insurance including 'payment protection'. It is appropriate only for use where the telesales representative is self-employed, i.e. an 'independent contractor'. To ensure that the parties are not deemed by the courts, employment tribunals or HMR&C as 'employer' and 'employee' (with all the legal, tax and NI consequences that would follow) it is important to avoid stipulating/controlling the hours worked each day/week or, for example, setting binding targets for calls made per day positive responses received each week/month. Paragraph 1: This sets out the basic duties of the telesales representative: 1.1 states that call shall be made from a list of targets supplied by the company and that additional proposed targets must be approved beforehand. The last sentence is worded in such a way as to avoid a binding obligation to make a set number of calls per week so as to reduce the risk that the telesales worker might subsequently claim that he/she lacked sufficient control over his/her working day to qualify as an independent contractor and was, instead, an employee of the company. 1.2, 1.3 and 1.5 obliges the telesales representative to follow the company's 'pitch' as set out in the schedule and otherwise deal with the manner and times of any calls made on behalf of the company. 1.4 and 1.8 cover the telesales representative's reporting requirements regarding calls made, positive responses and complaints. 1.6 obliges the company to provide all necessary information for the calls to be made whilst requiring the telesales representative to ask the company for any additional material as may be necessary. 1.7 prohibits the telesales worker from selling other goods and services to targets. Any restrictions on the right of a telesales worker either to sell similar goods and services but to non-targets or to represent competitors to the company are likely to be legally unenforceable and may endanger the self-employed basis of this agreement.
Paragraph 2: This set out the entitlement of the telesales worker to a percentage based sales commission on all clients introduced to the company. Where clients pay the company a lump sum as purchase price the commission may be dealt with as follows: "This will be calculated as follows: [ %] of the total net fees payable to us by the Target." Where the client is to pay the company periodic payments e.g. subscriptions then commission may be calculated as a percentage of a set number of future months payments: "This will be calculated as follows: [x %] of the total net fees payable to us by the Target [in the first [month/six months/year] of the contract]]." Where periodic payments are made by clients a company may wish to consider clawing- back part of the commission should a client subsequently cancel its payments, e.g. if commission is based upon the expectation of 6 months payments but the client cancels after only three months the company may wish to recover 50% of the commission. If so then the final sentence of the first paragraph of 2 should be used: "If a Target introduced by you cancels its contract with us within [6/12 months] we reserve the tight to reclaim commission already paid to you on a pro-rated basis: e.g. if a client cancels after [6 months of a 12 month obligation] you will be liable to repay [50%] of your commission." In addition the two sentences at the second paragraph of 2 within square brackets/in italic script should be inserted. [See also the optional last sentence of paragraph 3.] Each month the company provides the telesales representative with a statement showing sales made through him/her and the commission due. The telesales representative must then invoice the company on the basis of the company's statement with payment due within [14] days or receipt. Paragraph 3: The agreement commences as from the date of the letter, is of unfixed duration and may be terminated by either party on 30 days written notice. It is prudent to make provision for payment of commission on sales initially generated before termination but where a target does not become a 'client' until after termination. To avoid disputes a 'cut-off' time after termination should be inserted in respect of the payment of such 'post-termination' commission. The optional final sentence of this paragraph applies only where a system of 'claw-back' commission applies and provides for a 'cut-off' date to apply to the recovery of commission by the company. Paragraph 4: This is a standard provision for the protection of the company's confidential information, including its target lists. Note that the obligation of confidentiality continues indefinitely after termination. The second paragraph sets out two exceptions: disclosure made because of legal/regulatory obligations and to third party professional advisers such as lawyers. Paragraph 5: A standard provision obliging the telesales representative to deal in an honest manner with the company. Paragraph 6: Crucially this defines the relationship between the parties: the telesales representative is an independent contractor or self-employed representative of the company as opposed to an employee. Further there is no principal-agency relationship thus the telesales representative has no authority to legally bind the company and the company will not be liable for the acts of its representative. To ensure that third parties (such as targets) do not assume that the representative is either an employee or agent care should be taken in the drafting of the 'pitch' so as to make the relationship between the parties clear to all. The second paragraph reminds the telesales representative that it is his/her responsibility alone to ensure that there are no legal restrictions on home-working (terms in leases, mortgage deeds, insurance policies, local bye-laws/planning restrictions) and that the manner in which he/she works complies with the Health and Safety at Work Act 1974. Paragraph 7: Following on from paragraph 6 it is made clear that the telesales representative is self-employed for tax and NI purposes and that if HMR&C challenge that status the telesales representative will be liable for any liabilities or costs faced by the company. In practice unless a company can be shown to have colluded with a purported independent contractor to try and hide what was in reality a contract of employment there is little risk that a company will face penalties in the event that self-employed status is questioned. Paragraph 8: To ensure that the company can be confident that obligations under this contract are carried out by the telesales representative he/she is prohibited from assigning his/her obligations to a third party. The second sentence allows the telesales representative to delegate his/her obligations subject to prior written consent but he/she would remain liable to the company under the agreement for any loss caused by such delegation. Paragraph 9: In addition to the right of both parties to terminate on 30 days written notice at paragraph 3 there is an additional right for the company to terminate should the telesales representative become unable to fulfil his/her obligations, become insolvent or be in breach of the terms of the agreement. Paragraph 10: This makes clear that the telesales representative is liable to the company in respect of all losses/costs that it may incur as a result of the telesales representative's negligence or breach of the agreement. It is very broadly drawn and in practice it is unlikely that a court would order recovery of 'indirect' losses (such as damage to reputation) or losses specific to the particular nature of the company where the telesales representative would not have known of that. Paragraph 11: A standard provision dealing with the manner in which formal notices (e.g. notices of termination) are served. Paragraph 12: The governing law of the agreement is English law and where direct negotiation and formal mediation fail to resolve a dispute between the parties the English courts have jurisdiction to make orders as appropriate. Finally the penultimate paragraph makes it clear that the legal relationship between the parties is governed only by the agreement. This is important to avoid the risk of confusion.
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