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Zachary
Zachary, Attorney
Category: Legal
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Experience:  Lead trial/International commercial attorney licensed 11 yrs
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I was recently emailed a notice that my sales services were

Resolved Question:

I was recently emailed a notice that my sales services were no longer needed by a sub-agent California S corp that remarketed telecom services. I worked exclusively as a 1099 independent sub of a sub-agent contractor, with my responsibilities being cold-called prospects to generate sales and monthly commission residuals - with zero leads provided. I not only did that, but in addition paid my gas, hotel and car rental expenses so I could close business on behalf of this corporation. This corp. consists of 2 other people, the principle and her son, and required I sign a contract requiring I work exclusively through it. I elected to start a competing company, which was discovered by this sub-agent corp., and now they've informed me they're confiscating my monthly residuals because I chose to compete. The reason I opened my company was due to their repeated breach of the agreement by not providing a detailed commission statement from the telecom carrier that we did business with, despite their contractual requirement to do so. Furthermore, what precipitated me starting my company was I discovered the corporation's principle had called on my customer, without my knowledge, in order to avoid splitting the commission.

Questions:
- Are "exclusive" independent agent contracts binding and legal in California?
- If so, in event of their breach, do the exclusivity provisions remain valid?
- If so, does the principle's attempt to call on my account and thus not split the commissions with me, invalidate the contract?
- Can my commissions be confiscated under the exclusivity provision I signed?

Thanks for you assistance.
Submitted: 2 years ago.
Category: Legal
Expert:  Zachary replied 2 years ago.

Zachary D. Norris :

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Zachary D. Norris :

Thank you for your question.

Zachary D. Norris :

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Expert:  Zachary replied 2 years ago.
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Customer: replied 2 years ago.
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Customer: replied 2 years ago.
I am on line waiting for your response.,Can you address my question I posed above?
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Expert:  Zachary replied 2 years ago.
To answer your questions, an exclusivity deal means that you are only supposed to perform the type of work for that person during the term of your contract.

If you started your company before while you were still working for the other company, then you have technically breached your agreement to only do this type of work for them while you are under the contract. In other words, you had to terminate the agreement with the company before starting your own competing business.

That being said, your violation of the "exclusivity" clause in the agreement does not necessarily mean they get to keep the commissions you earned.

Your principle's fraudulent actions in trying to capture a commission for a customer would definitely be a material breach of your agreement. In that case you could elect to treat the contract as terminated. However, the question is whether you informed the company that you were going to treat their actions as a material breach and terminate the contract. If you simply started a competing business while they were still under the belief that you were in an exclusive deal with them means you have "unclean hands". This will prevent you from asserting that they were not damaged by your violation of the exclusivity agreement.

That being said, they must establish the damages by proof. They cannot simply state that the damages are equal to your commissions and keep them. Your attorney is correct, that is a violation of the law.

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-ZDN
Zachary, Attorney
Category: Legal
Satisfied Customers: 4021
Experience: Lead trial/International commercial attorney licensed 11 yrs
Zachary and 8 other Legal Specialists are ready to help you
Customer: replied 2 years ago.
Although I started my company in October 2011, essentually as a means to capture some additional business write-offs, I ran no business through it until July 20th, 11 days after I received the termination notice I referenced. I was effectively released by the corporation's principle prior to me putting any business through my new entity Zach.

So what are my options without getting into a lengthy and expensive legal ordeal? What demands can I make to the principle regarding the restoration of my commissions? It's a sizable amount that I relie on to live.
Expert:  Zachary replied 2 years ago.
That's good news. If you never did any business prior to the corporation's termination, then you are in the clear, as you did not violate the exclusivity provision. Merely setting up a company does not violate the exclusivity provision.

In regard to your options without getting into a legal jousting match, you really are limited. You can make the demand by letter, which apparently you have already done. Because you were an independent contractor, you cannot ask the Department of Labor to enforce the payment of your residual commissions. The only enforcement mechanism available to you after a demand letter is filing a lawsuit.

At that juncture, you have two options. You could file a lawsuit for breach of contract on the failure of the company to pay you your residuals. You could also file a Declaratory Judgment Action seeking a declaration that you are not violating the exclusivity provision and that the company still owes you the residuals. The reason I suggest the Declaratory Judgment Action is that California law allows the recovery of attorneys fees on this sort of lawsuit.

Either way though, unless you can get an attorney to take the case on a contingency arrangement, you will likely be forced to pay some hefty attorneys fees to get the case done.

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