Tuesday, August 24, 2010

Swedish Law - Severance Compensation to Sales Agents - 28 § Sales Agency Act

According to the Swedish Sales Agency Act 28 § Agent is entitled to severance compensation (“avg√•ngsvederlag”) when the agency agreement ceases if and to the extent
1. the sales agent has provided the principal with new customers or has significantly increased trade with the existing group of customer and the principal will derive a significant advantage from such development, and
2. severance compensation is reasonable, given the totality of the circumstances, and particularly the loss to the agent of in respect of contracts with the customers mentioned in the first paragraph.

The severance compensation shall not exceed an amount equivalent to one year's remuneration, calculated at an average during the last five years or during the period in which the sales agent performed the agency, if shorter.
This provision is mandatory for the sales agent's benefit and is based in Article 17 of EC Directive (86/653/EEC).

In calculating the severance compensation the agent's saved operating costs shall be taken into account. Circumstances which could affect whether severance compensation shall be paid and the size of the compensation are i.a.
• the length of the contractual relationship
• the size of investments by the sales agent
• the sales agent's work efforts
• the sales agent's success in the market.

Should the sales agent decline an offer of an extension of a fixed-term contract or if the sales agent starts to sell competing products following the termination of the agency agreement, this may reduce his possibility to obtain compensation. Competition prohibitions applicable after the termination of the agreement may, on the other hand, have a positive effect on the possibility of the sales agent to receive a substantial compensation.

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