ith the assistance of several contributing writers, we will bring you the most current information available to assist you in creating wealth for yourself and the companies you represent. We encourage your comments and suggestions as well as questions and topics to be addressed in future issues. Please send your comments to julie@greensheet.com. Adam Atlas joins The Green Sheet as a contributing writer from Montreal. A practicing attorney, he is a member of both the New York and Quebec bar associations. His legal work is primarily focused on U.S. agreements, and a majority of his clients are U.S. businesses in the payment processing field. Adam recently has begun specializing in electronic transaction law.

Question. Can an agreement between an independent contractor (e.g., sales rep or Merchant Level Salesperson) and a vendor/service provider (e.g., ISO) contain a production quota?

Answer. Yes. The opportunity to be an independent contractor (IC) is offered by the ISO and can be offered on limited terms. The agreement should not be such that the production quota is so hard to achieve as to make the agreement unreasonable from a business perspective for the IC.

The production quota should be negotiated in light of other terms of the agreement, such as pricing and exclusivity.

Q. If a production quota were in place, would this alter the agreement so that the IC would be legally defined as an employee?

A. The short answer is no. Employment law is a matter of state legislation and jurisprudence, so a definitive answer to this question will vary from state to state. However, the key distinction between an employee and an independent contractor is control.

Depending on the other terms of the contract, the fact of stipulating a quota, alone, will not necessarily transform an IC contract into a contract of employment.

The contract must be taken as a whole in order to determine whether the ISO has the control over the day-to-day activities of the IC.

Note that calling a contract an "independent contractor agreement" is not enough to avoid it being an employment agreement. Regardless of which side you are on (IC or ISO), it is important to know whether an IC is hired as an employee or as an independent contractor.

Q. Within current case law, can a sales agreement between an IC and an ISO legally contain a clause linking residual payments to a production quota?

A. As a matter of general principles of law, the answer is yes. However, the definitive answer to this question requires some research into the latest law in the state in question. The relationship between IC and ISO is a contractual relationship.

The validity of the contract will turn, among other things, on whether it is reasonable. One of the contributing factors to whether an agreement is reasonable is the current industry custom.

My experience of the industry, as a lawyer specializing in electronic transaction law, is that residuals are often related to production quotas. Even the validity of the agreement is occasionally related to production quotas.

This can become especially difficult if the IC is prevented by the ISO from selling for other ISOs. This a large question that I would be pleased to examine in greater detail for any interested party.

Topic: The Internet, E-mail and Bulletin Boards

Q. At what point is a person's right to "freedom of speech" constrained by another person's or company's right to protection from defamation, slander or libel?

A. The short answer to this question is "the truth." The long answer would take a couple of gigs (of memory). One of the defenses, available under certain circumstances against claims in defamation, slander or libel, is that the statement made is the truth. However, we all have different understandings of the truth and different ways of expressing the truth.

Everyone posting information on the Internet must be careful and consider the possible economic consequences of postings about third parties. Publishers of slanderous postings have been liable for damages even though the subject of the slander did not suffer any actual damages.

This is one of the biggest questions out there right now for bulletin board administrators. The following are four cases on this subject that have made the news recently:

• Proof of Internet defamation: The Minnesota Supreme Court recently dismissed a claim for Internet-based defamation. The basis of the ruling was that postings on a newsgroup by one member ridiculing the credentials of another were not proved to be expressly aimed at harming the latter.

  The U.S. Supreme Court declined to hear an appeal by the plaintiff, leaving the Minnesota as a guiding case in this area of law.

• FTC Spam Forum debates merits of blacklists: An FTC Spam Forum on April 30 to May 2 heard differing views on whether spam blacklists were beneficial to the public good or harmful for blocking innocent e-mail.

• eBay not liable for libel posted by seller: A California court held that eBay was not liable for libelous comments made on its site by a seller about a bidder.

• Ontario court equates Internet postings with newspaper publishing: A court in the Province of Ontario has held that an individual who posts defamatory information on the Internet can be held liable in the same manner as if the individual had published it in a newspaper or broadcast it over the airwaves.

In publishing The Green Sheet, neither the author nor the publisher is engaged in rendering legal, accounting or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought.

For further information on this article, please contact Adam Atlas, Attorney at Law; e-mail: atlas@adamatlas.com; phone: 514-842-0886.