Commercial Agents - To Retire or Not to Retire?

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If an agent terminates the agency contract, he will lose his entitlement to compensation under Regulation 17 of the Commercial Agents Regulations other than in certain scenarios. One of those scenarios is where the agent retires on the grounds of age, infirmity or illness.

However, for the agent to remain entitled to compensation from his principal under the Regulations, he must be able to show that his age, infirmity or illness means he cannot reasonably be required to continue his activities.

If an agent is suffering from severe ill health, it may be relatively easy for the agent to show he cannot reasonably be required to continue his activities, whereas retirement on the grounds of age can be more tricky.

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Default retirement age for commercial agents

There is no default retirement age in the UK, and the Regulations do not state at what age an agent may retire and still claim compensation. It is clear from cases where the court has considered agents who have terminated their agency on the grounds of age that each case will be decided on its own particular facts.

It is likely that an agent who has reached the state pension age of 65 would be deemed to have reached reasonable retirement age entitling them to terminate their agency and still claim compensation, but what if the agent intends to continue with other agency activities or another different type of role for which he is remunerated? Does that mean the agent loses his entitlement to claim compensation under Regulation 17 because he has not retired from all paid work?

This is a question for which there is no definite answer. If the agent plans to continue working in any capacity following retirement from the agency, this must be considered carefully, as it could inhibit a compensation claim.

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Comparing the agent’s planned post-termination activities to the agency role

The agent’s circumstances must be considered on an individual basis. If the agent intends to continue to perform another significant role after the termination of the agency (whether that is an agency or other type of role), which involves a similar level of commitment, stress and pressure, it will be much more difficult for the agent to demonstrate that in consequence of his age he cannot reasonably be required to carry on his agency activities.

The principal may argue that the agent has effectively not retired at all. It may, in those circumstances, be legitimately able to avoid paying Regulation 17 compensation on the grounds that the termination of the agency is not justified on the grounds of age, in consequence of which the agent cannot reasonably be required to continue his activities (Regulation 18).

On the other hand, if the agent plans to carry out a role after termination which is in no way analogous to the agency role he is retiring from (for example, a part-time role involving a few hours per week with no travel, sales targets or reporting commitments, or even a voluntary role), such activities are less likely to affect the agent’s entitlement to claim compensation upon termination of his agency.

The right to compensation should not be affected, provided the agent can evidence that the role is less demanding and time-consuming than the agency role being terminated, especially if the new role is considered more of a hobby to fill the retirement years instead of anything financially driven.

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Does ‘retirement’ from an agency mean retiring altogether?

It is perfectly feasible that an agent’s age means he cannot reasonably be required to continue his agency activities. His age does not necessarily mean he cannot perform a different type of role. The more demanding the agency role, both in terms of time commitment and pressure, the easier it is likely to be for the agent to demonstrate that he should be entitled to retire from his agency due to his age and still claim compensation whilst still engaging in other retirement activities.

It is recommended that an agent considering retirement on the grounds of age seek legal advice before taking steps to terminate, to ensure any entitlements under the Regulations are preserved.

Retirement for Commercial Agents

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If you have any more questions or would like more information regarding retirement and compensation for agents, you can contact our Commercial Agency Team below.

0161 941 4000