Requirements of the Agency Agreement in Spain

As defined in Article 1 of the Law of Agency Agreements (from now on LAA), these types of agreements are for which a natural person or legal entity is obligated to promote, or promote and conclude, commercial acts or operations. Unless otherwise agreed, the agent does not assume the risk and responsibility of such operations.

The Agency Agreement requires permanency and stability; it’s a term contract which may be fixed or indefinite.

Agent Charateristics

• Independence: If it is ascertained that the agent cannot organize his work activities nor can the agent arrange to dedicate his time to specific activities based on his standard of performance, it is understood that he is a dependent and hence subject to a contract
• To act as an agent, the conclusion of commercial actions and operations will be done in the name of the employer on whose behalf the agent is acting
• Unless otherwise agreed, he shall not be entitled to reimbursement of expenses incidental to this work
• Remuneration of the agent: may consist of paying a fixed amount based on commission, or a combination of both.

Agent Obligations

• Must act honestly and in good faith, safeguarding the interests of the employer on whose behalf he acts as agent
• Must deal diligently with good business judgment in the promotion and, where appropriate, conclusion of acts or operations that may have been entrusted to him
• Must inform the employer of all available information necessary for the proper management of all acts or operations entrusted to the agent
• Must develop his activity per instructions mandated by the employer where they do not affect the agent’s independence
• Must receive, on behalf of the employer, any claims presented by third parties regarding defects or the defective quality or quantity of goods sold and services rendered as a result of these mandated operations, even if they have yet to be completed
• Must set up an accounting system to record the acts or transactions relating to each employer on whose behalf he acts.

What criteria must be met to qualify as an agency agreement and avoid being classified as an employment relationship?

As indicated above, the distinctive note between the agency agreement concerning an employment contract is the independent nature of the agent.

The relationship which exists between the agent and the company on whose behalf the agent acts is commercial, not an employment relationship, so it does not apply under the Workers’ Statute. If it is ascertained that the agent does not work independently, it is regarded as an employment contract.

What also is relevant in determining whether a contract is an agency agreement is the concept of the trade representative (Article 2.1 f) as defined by the Workers’ Statute, which is a special work relationship, where the representative is involved in commercial transactions on behalf of one or more employers, without assuming the risk and responsibility of these transactions.

While at first glance both concepts appear to be the same, we must address the unique characteristic which distinguishes the two: the independent nature of the agent.

In this regard, the jurisprudence of the STSJ in Madrid on 9 October 2007, states that the key element of the NON-LABOR MOVEMENT will lie in how to develop the movement and more specifically how to develop autonomy and its implementation, understanding that the power to organize these professional activities, like time dedication, must conform according to our criteria (art. 2 LAA).

Therefore, to determine whether there is an agency agreement, commercial in nature, or if there is a trade representative agreement, with an employment relationship protected by the Workers’ Statute, we address the degree of independence with which each agent acts to the guidelines set out by the employer.

Any employer wishing to conclude an agency agreement with an agent shall take into account the effect of such obligations entrusted to him of which the law applies to the present contract (art 10 LAA) and above all must respect the independence with which the agent will perform trade operations. If it is ascertained that the employer intercedes notably in the way in which the agent is operating, it is understood that there is a dependence and therefore is a labor contract rather than an agency agreement.

For additional information regarding the agency agreement in Spain,