If you’re in sales, you know the unique challenge of living and dying by your sales number each month or quarter. Working hard to continue to impress your employer and avoid the “What have you done for me lately?” mentality is part of the rough-and-tumble world of sales. But what happens when your employer tries to cheat you out of the commissions you’re owed? In today’s blog post, we tackle some of your options if your employer is reneging on an agreement to pay you a commission.
There are primarily three ways that our attorneys see employees cheated out of commissions. First is when an employer changes the terms of commissions partway through a job. The second is a lot more like a scam, where an employer goes around promising new salespeople jobs that pay commissions and then fires them after a few months of collecting sales before they ever pay. The third is when an employer tries to use complicated formulas to hide how much money is being made from sales.
First: Do you have to accept a change of commission?
In a situation where an employer changes the terms of the commissions in the middle of a project, Pennsylvania law has generally recognized that they have to pay what has been previously agreed to. As a simple example, if your employer agrees that for every service job you sell, you get 10% of the price, they can’t change in the middle of a sale that is almost completed and say now you only get 5%. They can, however change the rate for future sales. The gray area starts where an employer changes terms in the middle of a time period which might affect open sales. In this example, suppose an employer raises a base salary, but cuts commissions to 5% starting immediately on all sales, including those not concluded. In this instance, the change may be lawful, but the employee may also have the right to insist on the old contract until those sales are finalized.
Employees have several options in this situation. The first is to politely push back, whether by internal email or in a conversation with your boss. We always prefer to get things in writing, but even an oral conversation would suffice if there is a way to document it after the fact. An employer generally has the right to change future commissions, but an employee is within his or her rights to decline the change on open jobs.
The employer who refuses to pay earned commissions can be sued personally.
In situations where an employer refuses to pay commissions, you have powerful remedies under the law. You can sue the employer as well as any owners or officers of the employer. You are entitled to reimbursement of attorneys’ fees and penalties on top of the wages owed.
In addition, you may be part of a class action that has rights with other employees who were similarly cheated. If your “draw” doesn’t rise to the level of minimum wage with the time you’ve put in and without your commissions, you may also have a claim under the Minimum Wage Act in Pennsylvania or the Fair Labor Standards Act (FLSA) under federal law. Both of these allow powerful remedies.
If the math is complicated, make sure you’re not getting cheated.
Employers are allowed to offer complicated schemes to determine payouts and commissions, and sometimes these are in everyone’s best interest. But if the formula is complicated, make sure you are double-checking the numbers. If your pay is dependent on how much the company is making, you’re entitled to check the books regularly to see that your pay is being correctly calculated. In counseling employers, we often advise them that simple is better, because even unintentional mistakes can lead to lawsuits, attorneys’ fees, investigations and more.
If you have questions about a commission or unpaid wages, we welcome you to call us at Cornerstone Law Firm and set up a consultation with one of our attorneys. Our attorneys help employees who have been cheated out of wages to be made whole and to ensure that employers don’t get away with giving them less than what they deserve. We also counsel employers and help them find fair ways to compensate employees that make everyone more successful. Call for your consultation today.