When an agent’s performance has dropped off as a result of his contracting an incurable illness, the position of the principal is a difficult one under the Commercial Agents Regulations. This is because the Regulations do not expressly deal with the issue of a failure of performance. 

On one level if the agent’s lack of performance is so great as to constitute a repudiation of the agency agreement, it is open to the principal to accept the repudiation, bring the agreement to an end and avoid being liable to pay compensation or indemnity to the terminated agent.  However, often the failure of performance is not such as to enable the principal to treat it as a repudiation.  More commonly the agency agreement itself fails to deal either adequately or at all with the performance required of the agent, in which event arguments as to lack of performance are even more difficult. 

In a situation where the agent’s performance has fallen as a result of his incurable illness, the principal finds himself between a rock and a hard place.  If the principal does not act, the agent’s performance can be expected to worsen.  In this situation a well advised agent is likely to consider whether he can claim that the nature of his illness is such that he can no longer reasonably be required to continue his activities as an agent.  If this is so, it will be open to him to terminate the agreement on the grounds of illness or infirmity and still have a statutory entitlement under the Regulations to compensation or indemnity! 

At the same time, more callous principals may note that the death of an agent will not provide an escape route.  This is because the Regulations make it clear that the estate of a deceased agent can claim compensation or indemnity.

Although there have been no reported cases on the point, if a principal terminates an agency agreement because of an agent’s incurable illness, there is a serious risk that a well advised agent would look at raising a claim under anti-discrimination legislation.  The Disability Discrimination Act is derived from an EU Directive which refers to “contract workers”.  It is generally accepted that the term “contract workers” covers agents.  If the Disability Discrimination Act does apply, the agent will be entitled to bring a claim for damages against the principal if he can show that by terminating the agreement, the principal either:

  • discriminated directly against the agent on the grounds of his illness; or
  • the principal discriminated against the agent because the principal failed (without justification) to make reasonable adjustments in respect of the agent’s illness.

Ultimately which ever way the principal proceeds to terminate the agency agreement, there is a risk of the agent bringing a claim for disability discrimination.  All other things being equal, termination for under performance carries the greatest risk as the agent may claim direct disability discrimination because his illness has been the reason for his underperformance.  Correspondingly the principal faces less risk in terminating the agency agreement by notice if:

  • the principal can give a reason for termination other than under performance; and
  • that reason stands up to scrutiny. 

At the same time the principal’s position will improve or worsen depending on whether or not there is a paper or electronic record kept of discussions leading up to termination and the reasons given for the termination.  An escape route from a discrimination claim may lie in being able to demonstrate that the same action would have been taken in respect of a fit and healthy agent who had under performed (unless the principal had not made reasonable adjustments in respect of the agent’s illness to enable him to improve his performance).  Further if the principal is able to show that it took into account difficulties encountered by the agent and made reasonable adjustments as to the way the agent was expected to perform his obligations, then this will be a defence to a claim of disability discrimination. 

All of this becomes of importance when it is remembered that there is no cap on the amount of damages which can be awarded in respect of a disability discrimination claim.  Instead such damages will be in addition to the agent’s statutory entitlements under the Regulations.

Written by Agentlaw Team

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