Employment Law -- Employee
A variety of industries pay commissions on sales as employee incentives, either by creating commission-only positions or by adding the potential to earn commissions to an employee's regular salary. These positions can entail anything from selling cars to promoting pharmaceutical products to selling high-end real estate.
If you are an employee who is paid by sales commissions, you should have a written employment agreement that specifically sets forth the conditions of payment. This should include how to earn the sales commission as well as the percentage or amount of the sales commission. If there are performance requirements or quotas to meet in order to earn a commission, for example, those terms should be clearly stated in the agreement. If the contract does not clearly define terms it can lead to disputes.
When you take a position that pays commissions, you should be aware of your legal right to collect unpaid sales commissions. Keep in mind that your rights may differ significantly according to your state's laws and the agreement you have with the employer.
Where no employment contract exists or where its terms are unclear, you'll need evidence of other communications between you and your employer to determine whether you are owed the disputed amount of commissions.
For example, suppose you contact your employer about owed commissions, but they are not willing to pay the sales commission until the purchaser has paid. This could constitute evidence that your employer will not pay your commission until the employer receives payment on the sale, even without an express contract provision requiring that to occur for you to receive your commission.
State laws vary in terms of upholding or invalidating certain terms of an employment contract regarding the payment of commissions. For instance, sales commission disputes often arise when an employee leaves their position with the company and does not receive earned commissions as agreed.
Typically, an employer cannot withhold already earned but unpaid commissions when an employee leaves their position unless the employment agreement states otherwise. If the employer terminates a commissioned position just to avoid paying those commissions, however, the terminated employee may still be eligible under state law to get paid. State laws can differ in how severance agreements handle legally earned sales commissions, however, and the circumstances under which you leave the job can have an effect as well.
In any case, it is important to keep any employee handbooks, employment contracts, and communications with your employer regarding the payment of unpaid commissions for evidence in case there is a dispute.
If you are considering accepting a job that is compensated in whole or in part by sales commissions, or if you are leaving a position that paid you a commission, you will need to have this information handy in case your employer does not pay you a commission that you earned. This is important information that an employment lawyer will need in helping you determine how to resolve your case.