There are often disputes on entitlement and amounts of commissions that might be due to an individual after leaving a job. This is common in industries where a sales representative obtains customers that pay for services or products monthly (e.g., insurance policies) that create so-called commission tails. It is also common with sales representatives who are paid commissions on a quarterly basis.

Generally, commissions must be paid even after an employee’s or contractor’s work relationship ends with a company – unless a mutual understanding to the contrary exists. There are several ways a company may ensure a mutual understanding is established that commissions are not due post-termination. For example:

• A signed agreement that contains language indicating no commissions are due post-termination.
• An acknowledged employee handbook or set of policies with language that commissions are not due post-employment.
• The individual is responsible for not only making sales, but also for providing the services associated with the sale, such as a service contract.
• There is a recognized custom in the industry that individuals are not entitled to commissions post-employment.

The above examples are situations in which the parties have a mutual understanding that commissions are not due post-termination. Absent a mutual understanding, however, an individual may be entitled to commissions even after leaving their job.

A written agreement is generally not required to enforce a promise to pay commissions or bonuses. A verbal promise may be sufficient.

As a practical matter, however, it is wise for any agreements relating to compensation to be reduced to writing. Reducing to writing the amount and terms for payment of commissions or bonuses, as well as any other compensation components, prevents conflicting memories that can cause a dispute. A formal, signed agreement is not required. An email to the employee or contractor recapping the agreement can be enough.

It depends on the applicable state law. Claims for breach of contract and unjust enrichment allow for the recovery of unpaid wages. Additionally, some states have unpaid wage statutes that allow for pre-judgement interest, double or triple damages, as well as attorney fees.

It depends on the applicable state law, but generally, no. Punitive damages are not recoverable under breach of contract or unjust enrichment claims, which are typically the non-statutory claims asserted to recover unpaid wages. To recover punitive damages, the unpaid commissions or bonuses must be recoverable under a state statute that allows for punitive damages. In theory, punitive damages could also be recoverable under a tort claim, such as a fraud claim, but it is rare that a claim for fraud can be asserted in the context of unpaid commissions or bonuses.

Generally, yes. Most states have “unpaid wage” statutes that allow for recovery of attorney fees when suing for unpaid wages. Unpaid commissions and bonuses are considered a form of wages.

In some states, double or even triple damages may be recoverable, in addition to attorney fees. Most states allow for the recovery of attorney fees to incentivize people to file lawsuits even if the unpaid wages are relatively small. In turn, that motivates companies to ensure wages are timely and accurately paid.

When looking for an attorney to handle a commission or bonus dispute, compare the background of the attorneys you are considering. Consider their subject matter expertise, educational background, past results for clients, and references.  We are glad to share references.

We handle unpaid commission and bonus disputes in Florida and Georgia.