Unpaid Commissions – Get Paid What You Earned with Experienced Sales Rep Attorneys
Fight for the Commissions You Worked Hard to Earn
- Nothing is more frustrating than working for months, or even years, to cultivate markets for your Principal’s products; then finally landing a long-term purchasing agreement with a key account and earning your first large monthly commission check, only to have your Sales Representation Agreement (SRA) terminated for convenience (greed).
- Luckily, 35 States in the U.S. have laws protecting independent sales reps and their commissions. Some award double, triple or even quadruple damages plus the sales rep’s attorney fees, for violations.
- Attorneys in this field also have the leverage of legal doctrines established decades or even centuries ago, such as Procuring Cause and Bad Faith Termination. So even in States with no sales commission protection statutes (or weak ones) a sales rep may still have the leverage to pressure a settlement in the wake of bad conduct by their Principal.
Did your Principal or Employer deny commissions after you closed a deal, through an opportunistic termination?
If you were denied commissions by a termination which came shortly after closing a deal, that may be a breach of covenant. Unpaid sales commissions could be recoverable for such a breach of covenant.
Did your Principal or Employer reduce your commission rate or change other key terms, after you closed a deal?
If your Principal or Employer reduced your commission rate or changed other key terms after you closed a big deal, that may be a breach of contract or covenant, either one allowing collection of damages.
Did your Principal or Employer reduce your commission rate or change other key terms, after you closed a deal?
If you were terminated before receiving commissions, you may still be entitled to receive those commissions under various state laws and legal doctrine.
- Don’t let greedy business practices derail your right to commissions. Contact our attorneys for a free consultation.
Common Types of Unpaid Commission Disputes
- Past due Commission Payments (while still under contract.)
- Delayed Commission Payments (outside contract timelines.)
- Reduced Commission Rates (lowered without consent.)
- Termination Before Commission Payment (to avoid paying earned commissions.)
- Split Commission Disputes (issues with dividing commission between several reps.)
- House Accounts (commissionable accounts go in house to avoid commissions.)
Tactics Principals and Employers Use to Avoid Paying Commissions
Verbal Agreements Without Documentation
Verbal agreements without backup documentation can lead to unpaid commissions. However, whenever a Principal or Employer allows a sales rep to work without a written contract and then fails to pay commissions they agreed to pay, a Procuring Cause case may result, making recovery of commissions on long-term sales much more likely.
Also, the Uniform Commercial Code (UCC) allows correspondence between business people to define the terms of their contract. U.C.C. based cases also offer the possibility of recovering commissions on long-term sales.
Ambiguous Contract Terms
Ambiguous or overly sophisticated commission provisions can sometimes be exploited by Principals or Employers to avoid paying commissions. Hiring an attorney familiar with the law on sales reps to interpret the contract provisions, or an accountant to decipher sophisticated commission formulas may be necessary.
Changing Terms After Closing Sales
Changing commission rates after closing sales is a straight breach of contract. Principals or Employers will try to argue that it was a modification of the contract. Be sure to object in writing whenever this happens and do not accept the payment at the incorrect rate.
Firing Reps Before Payment Dates
Firing a sales rep opportunistically before a commission becomes payable is a breach of covenant referred to as a bad faith termination. This type of wrongful termination can result in the ability to collect damages equal to the commissions that were wrongfully denied due to the termination.
Several states have codified provisions referring to this situation and requiring the payment of commissions as if the contract had never been terminated.
Legal Protections for Recovering Unpaid Commissions
Federal Laws
- Fair Labor Standards Act (FLSA)
Generally prohibits unfair business practices.
State Laws
(A sampling of some of the 35 States that have laws protecting sales reps).
The laws of all 35 States with sales commission protection statutes can be found on the website of MANA – the Manufacturer’s Agents National Association.
- The Arizona Sales Commission Protection Act
Requires Courts to award 3 times the contract damages proven by a sales rep, and the sales rep’s reasonable attorney fees, if they win the case.
Also allows claims by sales reps for commissions on sales even after termination if they can prove that the termination was done to avoid the payment of those commissions (a codified claim for bad faith termination).
- The California Sales Commission Protection Act
Requires Courts to award 3 times the contract damages proven by a sales rep when Principals don’t pay commissions according to the terms of the SRA. It also requires an award of the sales rep’s reasonable attorney fees if they win the case.
- The Connecticut Sales Commission Protection Act
Requires Courts to award 2 times the contract damages proven by a sales rep when Principals don’t pay sales commissions within 30 days of termination or within 30 days of their due date, after termination. Also requires an award of the sales rep’s reasonable attorney fees if they win the case.
- The Georgia Sales Commission Protection Act
Allows Courts to award up to 2 times the contract damages proven by a sales rep when Principals don’t pay sales commissions within 30 days of termination. Also requires an award of the sales rep’s reasonable attorney fees if they win the case.
- The Illinois Sales Commission Protection Act
Allows Courts to award up to 3 times the contract damages proven by a sales rep. Also requires an award of the sales rep’s reasonable attorney fees, if they win.
- The Maryland Sales Commission Protection Act
Allows Courts to award up to 3 times the contract damages proven by a sales rep when Principals don’t pay sales commissions within 45 days of their due date after a termination; and requires an award of the sales rep’s reasonable attorney fees if they win.
Also allows claims by sales reps for commissions on sales even after termination if they can prove that the termination was done to avoid the payment of those commissions (another codified claim for bad faith termination).
- The Massachusetts Sales Commission Protection Act
Allows Courts to award up to 3 times the contract damages proven by a sales rep when Principals don’t pay sales commissions within 14 days after termination or within 14 days of their due date after termination. Also requires an award of the sales rep’s reasonable attorney fees if they win.
- The New Jersey Sales Commission Protection Act
Requires Courts to award 4 times the contract damages proven by a sales rep when Principals failed to pay commissions due within 30 days of termination, or within 30 days of their due date after termination. It also requires an award of the sales rep’s reasonable attorney fees if they win.
- The New York Sales Commission Protection Act
Requires Courts to award 2 times the contract damages proven by a sales rep when Principals don’t pay sales commissions within 5 days of termination or within 5 days of their due date, after termination. Also requires an award of the sales rep’s reasonable attorney fees if they win the case.
- The North Carolina Sales Commission Protection Act
Allows Courts to award up to 3 times the contract damages proven by a sales rep when Principals don’t pay sales commissions within 30 days of termination or within 15 days of their due date after termination. Also requires an award of the sales rep’s reasonable attorney fees, if they win.
Also allows claims by sales reps for commissions on sales even after termination if they can prove that the termination was done to avoid the payment of those commissions (another codified claim for bad faith termination).
- The Ohio Sales Commission Protection Act
Allows Courts to award up to 3 times the contract damages proven by a sales rep when Principals don’t pay sales commissions within 30 days of termination or within 13 days of their due date after termination. Also requires an award of the sales rep’s reasonable attorney fees if they win.
- The Pennsylvania Sales Commission Protection Act
Allows Courts to award up to an additional 2 times the contract damages proven by a sales rep when Principals don’t pay sales commissions within 14 days of termination or within 14 days of their due date after termination. Also requires an award of the sales rep’s reasonable attorney fees, if they win.
- The Texas Sales Commission Protection Act
Requires Courts to award 3 times the contract damages proven by a sales rep operating in Texas when Principals with non-compliant SRAs (under these laws) don’t pay sales commissions within 30 days of termination. Also requires an award of the sales rep’s reasonable attorney fees if they win.
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Steps to Take If You’re Owed Commissions
Step 1: Review Your Contract Terms & the State Laws at Issue
- Focus on clauses and statutory provisions related to commissions, breaches and termination.
Step 2: Document All Transactions
- Maintain proof of customer communications, sales contributions, agreements to pay commissions and failure to pay commissions, or late payment of commissions. Prepare a spreadsheet on damages based on this info.
Step 3: Communicate with your Principal or Employer
- Question why they did not pay the commission, and try to get an answer as to when they will. It may just have been an accounting error. If it’s something more devious, you need to know anyway.
Step 4: Meet with an Attorney
- If communications with your Principal or Employer do not resolve the unpaid commissions, find an attorney knowledgeable regarding the law on independent sales reps and give them a concise chronology based background.
Step 5: Send a Demand Letter
- Demand unpaid commissions through the attorney. The Demand Letter should threaten statutory damages as leverage, although it may be best to start with a less threatening communication. If having counsel communicate for you will not assist the negotiations, then have the lawyer ghost write communications for you.
Step 6: Seek to Negotiate a Settlement
- A remedy out-of-court is usually best. Remember, however, that sales reps typically have a lot of leverage because of the punitive damage provisions in most sales rep protection statutes. Don’t settle cheap!
Step 7: Consider Legal Action
- If negotiations fail, explore litigation options for commission recovery, potential punitive damages (under State Laws) and recovery of attorney fees.
How Our Attorneys Help Recover Unpaid Commissions
Contract Review and Negotiation
- Evaluate contracts for breaches, violations, and remedies.
Demand Letters and Settlements
- Recover commissions through negotiations without going to court.
Litigation for Commission Recovery
- File lawsuits for breach of contract or violations of statutes.
Protecting Territories and Account Rights
- Defend against House account reclassifications or territory violations.
Staying silent about an unpaid commissions so you don’t rock the boat? Don’t let your hard-earned income slip away. You have enforceable rights. Contact our sales rep attorneys today for a free consultation.
Client Success Stories
$729,000 Settlement for large electronics industry sales agency against European Electrical wire and cable Manufacturer. Lawsuit filed in U.S. to “ground” the litigation In California. Defendant did not want to litigate in U.S. and settled the matter within 90 days.
Approximate $1.9 Million Settlement after Lawsuit filed in Federal Court, within 6 months of filing suit. After early defeats in the lawsuit, the defendant agreed to pay commissions for 2 years on sales procured by our client. Huge sales meant huge commissions paid.
$900,000 Settlement after hydraulics manufacturer breached representation agreement, but agreed to compensation after Mediation. Resolved within 8 months, out of court.
$210,000 Settlement less than 5 months after retained. No lawsuit. A pharmaceuticals manufacturer took House Accounts and terminated our client when they objected.
$749,000 Judgment after approximately $150,000 in unpaid commissions boiled into a lawsuit. After trial in California Superior Court, based on California’s Sales Commission Protection statute, triple damages were awarded (plus attorney fees). One of the first triple damage judgments under this statute.
$4.56 Million Settlement after lawsuit resulted in reinstatement of contract after termination, for housewares industry mega-sales agency.
$750,000 Settlement after Federal court litigation over auto parts sales and unpaid commissions. Client garnered important design wins but was not paid commissions for all sales based on those design wins.
FAQs About Unpaid Commissions
A sales rep can recover commissions even if they were terminated before payment by the customer. It depends on the provisions in the contract as well as the background of the dispute.
If your contract doesn’t include commission details, correspondence confirming the commission agreement can be used instead, to prove your case. Course of dealing (the method by which you were previously paid) can also establish a commission agreement.
The length of time in which a sales rep must file a claim for unpaid commissions varies from State to State. Generally, however, breach of a written contract has a four-year statute of limitations; while breach of an oral contract has a one or two year statute of limitations.
Penalties which can be recovered include basic contract damages, punitive damages (up to 4 times what’s owed), and recovery of attorney fees.
Don’t Leave Your Earnings Behind - Fight for Your Commissions
- If your contract is breached, do not delay! It is critical to contact an attorney with knowledge of this area of law to quickly ascertain the exact breaches, and the statutory leverage you may possess to enforce rights under State and Federal laws.
- Contact our experienced attorneys today for a free consultation about unpaid commissions as statutory violations which may allow you to recover double, triple or even quadruple the amount you are owed in commissions. We have over 70 years of combined experience. We know which buttons to push!