Relevant aspects and precautions in the commercial representation relationships

Valdirene Laginski
associate lawyer
Pacheco Neto Sanden Teisseire Advogados

Brazil has a huge geographic territory and due to it, it is very common for suppliers to take professionals to sell their products in distant places far from their headquarters, subsidiaries, or even their distributors.

These professionals are entitled as Agents and their activities are regulated by a specific legislation, Law 4.886/1965 (Law of the Commercial Representatives and self-employed).

According to the first article of the Law 4.886/65, an Agent can be an individual or legal entity, without employee relationship with the Contractors. The Agent plays by himself or more people intermediating business relations. The Agent's role is to negotiate and to manage proposals or orders from buyers by sending it to the Contractors. The Agent will receive a commission on the sales.

In order to perform their activities, the Agents must have a professional register in the Regional Council, a representative body of the category - in São Paulo it is called CORE-SP. If the Agents do not have this registration, they may not perform the activities regularly. Before hiring, the Contractors must demand the Certificate from the Agents.

The Agents do not have their activities regulated by Consolidation of the Labor Laws (CLT) because they are not employees. Both relationships must be treated according to its specific particularities.

The Agents have their own rules and the remunerations' payments are made exclusively by commission, a percentage of the sold goods. An employee regulated by CLT, besides the monthly salary, also has rights to other labor-related payments.

Besides all that, the Agents should not have any kind of control over their working days. As well as they should not have either a relationship of subordination. However, the Agents must present to the Contractors the selling reports, attend to training and demonstrations related to the selling products etc. These activities are related to the commercial representation not to an employment relationship.

Even though the Contractors are much more aware of the requirements before to hire the Agents, it is still very common for hiring to occur without the minimum cares. This lack of precautions in the hiring and during the relationship can be a great problem in the future for the Contractors because, in case of a labor complaint, for example, the commercial representation could be declared as a labor relation.

If the commercial representation is declared as a labor relation, the Contractors will be obliged to pay all labor-related values according to CLT provision.

The difference between commercial representation and employment relationships is unclear. This unclearness comes from the beginning of the relationship and remains during all periods of the commercial representation. Due to it, there is a huge number of labor complaints related to the commercial representation since in most cases they are treated as employment relationships.

For the Contractors, it is very important to adopt some precautions before hiring the Agents, for example: to demand the commercial representative´s certificates; to sign a contract describing all activities in details; to define geographic areas; to indicate commissions percentage; to require exclusivity or not; among other necessary requirements.

As explained before, if the commercial representation is treated as an employment relationship, there is a big risk of labor complaints bringing a considerable liability for the Contractors.

In order to terminate a commercial representation, it is very important to sign an instrument of termination, paying all due commissions, as well as having a calendar to pay pending commissions from the closed deals.

When the commercial representation it is terminated without cause, the Contractors must pay an indemnification of 1/12 of all commissions received by the Agents during the whole period which the representation remained in force.

As it can be seen, the termination of a commercial representation is different from the termination of an employment relationship in which the labor funds must be calculated according to the CLT and Social Security rules.

If the commercial representation is declared as an employment relationship, the civil agreement to terminate the relationship between the Contractors and the Agents could be considered as null by the Labor Justice. However, the amount already paid to the Agents could be compensated in the labor claim.

Therefore, we can conclude that both relationships discussed above are different and they must be treated according to their particularities.