Often in my employment practice, I have clients, who are salesmen, that inquire about their “commission payments” and their legal rights surrounding these payments when they have been involuntarily terminated. As a general rule, if the “commission” has been “earned” prior to the termination, the commission in fact is payable. This, of course, begs the question as to when the commission is earned.
The issue of when a commission is earned is usually resolved by the company’s own policy regarding the timing of payment of commissions. There are typically three different periods when a company determines that a sale has in fact been made and triggers a payment of a commission. The initial period is at the time of the sale itself. If, in the normal course of their business, the time of sale is when the commission is earned, then upon termination the salesman is owed those commissions. If, on the other hand, the company, pursuant to their own pay practices, pays commissions at the time of the delivery of the product or the service, then that becomes the time at which the payment has been earned. The third scenario is if the company pays the commission at the time they receive the payment for the goods or the services, then the commission is earned at that time.
In summary, the law defines the term “earned” based upon the company’s own practices. Once a commission has been “earned,” it is then treated the same as wages and is payable to the employee at the time of any termination. It’s always a good idea to seek experienced legal advice when presented with employment law questions, since the only person who has legal rights is the person who knows what their legal rights are.
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