Thursday, August 28, 2014

On Agency Clauses

I recently read an article in the latest SCBWI Bulletin (you must be a member to view/read) about agency clauses in contracts.

A typical agency clause will read something like:

Author authorizes Agent, located at (ADDRESS), to collect all gross sums of money due under this Agreement. Any receipt of such sums shall be a good and valid discharge of Publisher's obligations to make payments to Author. Agent is empowered to act on behalf of Author in any and all matters arising out of this Agreement.

In the article, the author addresses why this is problematic, and recommends either not having this clause, and having all money go directly to you, or modifying it to be revocable at any time, so that if you part ways with your agent, you can have funds go all to you or your new agent.

For the record, I HIGHLY respect SCBWI, and I HIGHLY respect the author of the article. The intention behind it is very good, and authors SHOULD think about what they're agreeing to; it IS problematic if you've signed with a "schmagent" - someone who disappears, along with your statements and royalty checks, leaving you high and dry.

I shared my post with Sara Rutenberg, the author of the SCBWI article, who pointed out: “Unfortunately, there are so many agents out there who are unscrupulous. The column was written in response to a number of people who found themselves in [the position of being with an agent who is not remitting timely or disappears]. It is critical to [discuss the agency clause] up front, or people will not feel comfortable taking actions needed to protect themselves.”

I wholeheartedly agree with that sentiment. And, her article was really intended to address these schmagent situations. However, most agency agreements, including those from big, big agencies, do include language on agency clauses which can't be modified, and I think it would be a mistake to feel that you are getting a bad deal from, or not sign with, an agent or agency that insists on this language.

Why?

There are several issues with direct payments. If you have your royalty statements and payments coming to you, instead of your agency, you would be responsible for remitting your agency's commission and, at the end of the year, also remitting a 1099 to that agency for what you paid them. I actually can’t imagine that any foreign publisher would be ok sending payment to the author, instead of the foreign co-agent who brokered the deal – but, in that case, you'd be responsible for remitting payment to your agent, your co-agent, and dealing with any tax withholdings applicable to the specific country's laws when you pay your co-agent (and then have to remit a tax form to them, too, at the end of the year).

You would also be responsible for sharing statements with your agent(s). Why? We need to check them! Think mistakes never happen? Think again!! It is part of my job to monitor any statements that come in, to be sure everything is calculated and reported correctly.

Second, there’s a saying in publishing: money should flow TO the author, not FROM. This saying arose out of troubling scams, and still holds true today.

Third, while it would be LOVELY if I could woo and entice J.K. Rowling away from her agent and suddenly be able to collect a commission on her previous contracts...that's just not the way it works when you split with an agent. Ethically, and typically, contractually, the agent who sold the book is due the commission. Not the new agent you sign with. Why? Because it’s that old agent who did all the work to get that contract. Me taking a cut of J.K. Rowling’s previous contracts, when I’ve done nothing to earn it, just doesn’t add up to me. Even in the situation above, where an agent leaves an author high and dry and disappears, I wouldn’t feel right taking a commission, because I didn’t sell the work.

Now, the new agent may be able to handle unsold rights - like translation, audio, etc, for the book the previous agent sold. And your new agent, with your permission (you must inform your previous publisher you have a new agent) can of course still help to protect your rights and look into issues with that previous contract (though, if this ever happens, I ALWAYS start with the agent who sold the book, assuming they weren't a schmagent, before reaching out myself).

If you do try and amend your contract with a publisher to have your new agent collect funds instead of your old, or have all payments go to you, they will likely require you to provide proof (or contact the previous agent to verify) that you can do so. This is because most agency agreements do, in fact, specifically clarify that any works sold under that agreement remain commissionable by the agency, whether you leave or not.

That's not to screw you over. Again, it’s to protect the agent from doing the work of editing, selling, negotiating the book, and troubleshooting...and then suddenly be SOL if you decide to leave. That work isn't negated because you left. Any future work is - and the agent shouldn't ask for commission on work they don't represent.

However, as Sara told me, “what we are all after is protecting the author- and if an agent is not remitting timely or disappears, there has to be a way to address this.”

I agree. And there are ways to still protect yourself.

First, and most common, is with split payments. I certainly work with publishers when I can, at an author's request, to have our commission sent directly to us, and then the rest to the author (15% to agency, 85% to author, in other words). And you can ask your publisher, even if you already have an agency clause, to amend to split payments later. But again, if you do, they’ll ask for that proof your former agent gave the ok, or proof the former agent can’t be found. It is a PAIN to get this done. Think hoop after hoop after legal hoop. Don't go in thinking it'll be a walk in the park.

You can absolutely discuss the split payment option with your agent upfront. However, keep in mind that not all publishers will agree to this (particularly in the case of subsidiary rights), which is why an agent may not agree to contractually be obligated to secure split payments for you.

The second option, post-contract, is to obtain legal representation and fight. Which is a pretty sucky thing to have to do. The Author’s Guild can help with this; but in sum, you’ll have to either settle with your former agent or in court, if you had an agency agreement between the two of you, about that former agent no longer receiving commission. I don’t honestly know of any cases where this has occurred; usually, when legal battles like this pop up, the author and former agent settle on the split payment option, and the publisher amends the contract accordingly. It’s a mess. Which is why I can understand Sara’s article about addressing this upfront.

But, as I said, this isn’t something every agent will agree to, even if discussed upfront. And that doesn’t have to mean the agent is a schmagent, or that you’re getting screwed. The agency clause is VERY common. At the end of the day, if you have doubts about whether or not you can trust your agent to handle funds or statements - why are you signing with this person?! I think the true warning, and really, what Sara was after too, should go against schmagents, rather than the agency clause. You sure as heck should have done your research to make sure the agent offering rep is legit.

The agent-author relationship should be one of trust. If you're worried your agent is going to, or currently is, screwing you over...you've got issues that need to be addressed immediately, either in conversation with your agent, or by parting ways/not signing with that agent.


ETA: SCBWI did post a correction on the Bulletin.

11 comments:

  1. Sharing this now--the best breakdown I've ever seen of this

    ReplyDelete
  2. Entering into an agency agreement is a business decision. While it is a wonderful thing to be good friends with people you are in business with, the first order of business is to protect your interests. Which means splitting the payments up front.

    If an agent doesn't want to do this, I would like to know on what grounds the agent thinks the author's money should flow to the agency instead of the author.

    There is no reason I can think of for someone to get all of my earnings before I get them, and then cut me a check for the money that should already be in my hands.

    ReplyDelete
  3. No, go after the agency clause to protect yourself from scmagents. Its an outmoded business arrangement, anyway. Send the author the money first. They wrote the book, they earned the pay.

    Let the subcontractor (AKA agent) get those money after the business they work for (AKA the author) gets its money first.

    ReplyDelete
  4. However, most agency agreements, including those from big, big agencies, do include language on agency clauses which can't be modified, and I think it would be a mistake to feel that you are getting a bad deal from, or not sign with, an agent or agency that insists on this language.

    There is a difference between "can't" and "won't." You can. You just won't. And that's fine. I could give you my books to rep. I just won't.

    ReplyDelete
  5. Shakuntalah D. BlamiresAugust 30, 2014 at 12:46 PM

    What a wonderfully informative piece of information for the starting author! Gives me more confidence in going into this wonderful life of authorship! THANK YOU AND KUDOS!!! : )

    ReplyDelete
  6. Excellent Post, Natalie. Thank you. I was stunned by the article in The Bulletin, and I'm glad you've taken the time to clarify why the agency clause reads the way it does. I'm also a bit surprised by some of the responses to your posting. There seems to be a real "us" and "them" mentality out there, and I don't think that serves anyone well. From what I hear, most authors freely discuss their agents, both the good and the bad, and bulletin boards, Twitter and Facebook are bombarded with comments about agents' and editors' working styles. Separate payments are definitely the best option, but there are still some publishers who will not allow them. The bottom line is that an author/agent relationship should be based upon mutual respect, and, quite frankly, I would not want to work with an author who thought I might be out to "get" them.

    ReplyDelete
    Replies
    1. If an agent isn't able to negotiate such a insignificant thing for publisher, but important for author like split payment, that it makes me wonder, what is the agent even able to bring to the negotiation.

      Delete
    2. Agents quit. Agents retire. Agents change agencies. Agents, like all of us, eventually die.

      You may think your agent is the greatest thing since sliced cheese. Hugh Howey, who is no advocate of the traditional publishing system, loves his to pieces. Good agents are treasures beyond price. But that amazing agent you have today may be a truly awful agent tomorrow, simply by the vagaries of fate. If you let SuperAgent have all your money today, you are letting SuperBadAgent have all your money tomorrow. If you don't want to think about the future, fine, but trust me, the future thinks about you.

      Delete
  7. People have no idea how insanely hard agents work, how little it pays, and how much heart most agents put into their clients' work. There seems to be a culture of agent bashing that goes on at times and it's really sad to see. While there are some scummy agents, there are scummy people in all walks of life and most agents are in the business because they love kid's books and love helping others.

    Please show some kindness and respect for the many good agents out there who have invested time educating and mentoring their clients while working hard with editors to help their clients become successful. Based on the meanness of some of the comments above, I chose to be anonymous rather than feel attacked like Karen Grencik was who has great negotiating skills, and who is one of the hardest working, most honorable, and most effective agents out there.

    ReplyDelete
  8. I have agency clauses built into both of my existing contracts, and I have absolutely zero problem with them. The publisher pays my agent, who takes her cut and promptly forwards the rest to me. Paying her clients is always her top priority, so I get paid only a few days after I would have if the publisher had sent the check directly to me. Also, the wording allows for split payments to be made at either my or my agent's written request if we part ways at some point down the road.

    Also, think about it from a credible agent's perspective. Let's say you're an agent who uses agency clauses. What happens if you don't remit payments in a timely manner to your clients? Your clients will complain, probably publicly, and dump you like a load of bricks, and your street cred will go out the window. A credible agent has a huge incentive to pay her clients right away so this situation never arises.

    But what if you're a credible agent who doesn't use agency clauses? The money goes directly to your authors, who may or may not be as committed to paying you promptly. What recourse do you have if this situation arises? You'll have to badger your clients into paying you, and if they still don't, you're up a creek. You can complain about them publicly, but you're not going to look like a self-respecting agent who's getting the word out about a lackluster author. You're going to look like a heel. And you can stop being their agent, but you're still out the money.

    Authors definitely need to be protected from scammers and bad agents, but I don't think agency clauses are the problem. If you're worried about signing a contract with an agency clause, then you need a new agent, not a contract without that clause.

    ReplyDelete