Unpaid Commissions

Some employers may terminate a commission-based employee just after they made a big sale. They then make the account a “house account” in order cheat the employee out of their commission. Other employees may fire a commission-based salesperson and neglect to pay them on sales they already procured.

Some employers like to change their commission plans mid-sales-stream. This means that they lower the commission their employees are entitled to after their employees have already found the customer and made the sale and maybe even after the products sold have been shipped and delivered to the customer.

Such mid-stream changes can be hard to address in legal terms as it depends on when a commission is determined to be earned. Most states have laws that say if there is an agreement in place stating when a commission is earned, it is binding. However, if there is no such agreement, it depends on the law of the state which can vary from state to state and even vary based on the type of sales.

If an employee’s contract involves commission, when and how the final commission payment is made will be outlined in their employment contract or in the existing policies or practices in the company. However, there are many employees who work with commission whose commission makes up most of their salary. In these cases, the amount of commission provided should be discussed and agreed upon in writing between the employers and employees.

This depends on a few factors. Many states do not have laws specifying if an employer has to include commissions in an employee’s the final paycheck. In the states that do, the laws state that the final paycheck must include all “earned wages.” However, this can be an ambiguous term. Some employers deem a commission earned when a sale is made while others deem it earned only when the money from the buyer arrives. For employees whose employment agreements state the latter, they may not be entitled to commissions in their final paychecks.

Some employers do not announce a change in their commission plans until a few months into a new year. This means that in those few months before the change, their employees are led to believe that the previous commission plan was in place. These employees would then later be notified that the new commission plan was in place since the start of the year and their commission rate for the sales they made in those few months is lower. This kind of retroactive change is considered a breach of contractual promise and is illegal.