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.