This question has come up in my practice over and over again throughout the years. An employee paid by commissions is fired and the employer refuses to pay commissions after the termination. What are the rights of the employee? Unfortunately, like so many areas of employment law, the answer is not always clear. The answer will depend on the situation and be very fact specific, and more so than in other areas of the law. I think a safe rule for every employee is to not assume that the employer is right when it claims no commissions are owed. Rather, an employee should gather all the paperwork they have related to the commissions and consult with a lawyer that specializes in employment law.
When I face this question on behalf of clients, a starting point is always the terms of the commission agreement. If the commission agreement is in writing, I want to review the terms of the agreement and see what language, if any, exists regarding when commissions are paid, how they are paid, and when they accrue. If the agreement is only oral, I want to know the specifics of that oral agreement if any, and how that oral promise has been met. Besides the agreements themselves, I want to know what the practice has been for paying commissions and how other terminated employees have been treated in regard to the commissions.
If an employee is involuntarily terminated, an employee may be owed a pro-rata share of commissions depending on whether or not the employee was fired for good cause. Under this theory, even an employee that is fired before a commission is due may be entitled to part of the commission he would have received at the later date. Under the same theory, an employee that resigns may not be entitled to the same amount due to the resignation.
Because employee’s rights to commissions are often unclear, I recommend the following tips:
- Make sure commission plans or agreements are in writing
- Make sure commission plans or agreements are clear as to how they are paid, when they are paid, and when they accrue
- If you have questions about your rights under a commission plan, contact an employment attorney
- If you are paid by commission and intend to resign, make sure you understand your rights to unpaid commissions before resigning
- If you are fired and not paid commissions, gather your paperwork and contact an employment attorney
- Don’t take your employer’s word for it when they claim you are not entitled to commissions
Lastly, please remember that this post and the posts in this blog are not legal advice, and can’t be for the reasons posted in my disclaimer on my website. If you need legal advice for your employment situation, you should contact an employment attorney who can discuss your case and provide you with advice that applies to your situation.