Mark Pestronk
Q: We run a large host agency. One our biggest problems these days is what to do with commissions we have collected but that none of our ICs has claimed. In many cases, this problem is caused by ICs who forget to enter a sale into our accounting system and apparently forget about the sale they made. In other cases, the problem is caused by ICs who we are no longer in contact with. To complicate things, some of these sales were apparently made by sub-ICs and sub-sub-ICs, and we really have no idea how to find them. Do we have a duty to try to figure out who the money belongs to? Or is it the IC's duty to submit a claim to us? How long must we keep this money as a separate accounting line item before we can simply take it as income? Is any of this money subject to state unclaimed property or "escheat" laws that might require us to turn the money over to the state government after a time?
A: If the ICs were your employees, you would have a duty to try to ensure that they receive their compensation, and if you could not find them, then the state unclaimed property laws would apply. After about a year or more, depending on the state, you are required to turn the unclaimed compensation over to the state.
None of these considerations applies to the host-IC relationship, which is a business-to-business relationship, so employment laws don't enter into my analysis. These questions should be governed by provisions of your IC contract, and if they aren't, then general principles of contract law would apply.
Ideally your IC agreement would require the IC, sub-IC and everyone on down the ladder to enter every sale into your accounting, invoicing or CRM system by a certain deadline. Their agreement should also require the contractor to enter changes and cancellations into your system. These measures would solve the problem of being unable to determine which IC a commission belongs to. Also ideally, departing ICs would have to provide their contact information.
If your agreement has these provisions, and a commission payment comes in to your agency with no way to identify it, you can keep it all, and you don't need to keep a separate accounting for such payments. You have no duty to identify which IC it may belong to, as the IC who made the sale obviously did not comply with the agreement.
If your IC realizes they neglected to make the entry and then makes a claim a year or so after the deadline, you don't have to honor the claim for the same reason, but you may certainly do so as a gesture of goodwill.
If your agreement does not require the IC to enter the sale into your accounting system or to leave contact information once the IC departs, or if a check comes in with no identifying information, you probably have a duty to make a reasonable inquiry of all your ICs so that the IC who made the sale can make a claim. If no IC does so, you are entitled to keep all the money.