I am in outside sales for a major corporation and earn variable commission. I will resign prior to receiving my next commission check and will be working for a competitor. The $ amount is significant and my concern is that this employer will not payout and cause me to hire a lawyer to fight the battle. I have not signed any non-compete or pre-employment papers to relinquish the earned commission in the event I terminate my employment. The company has a very vague policy in their "variable compensation plan" document that creates numerous ways for them to back out due to "significant managerial intervention in a deal" or "high discount levels". However; I work in teams and would like to think that if one person of the team is compensated than all people must be paid out their earned commission. I am looking for feedback and links to State or Federal regulations.

Thanks

I would be surprised to find any regulations at the Federal or State level that do more than define commissions as wages. They will NOT define when the commission is "earned," but leave that up to the company and its commissioned staff.

You have cause to be concerned, particularly given the ominous sound of "managerial intervention." I would not be concerned about "high discount levels" as this is simply a means of keeping the sales folks from selling a product at such a low price that the company sees little to no gross profit.

At what point is the commission "earned"? Some companies define it as when the customer pays for the product or service, so if you leave after closing the deal, but before payment is received, you are out of luck. Other companies go even further and state that you must be employed by the company at the time of commission pay out to have earned the commission. I had a boss, once, who worked for such a place. The company rarely saw the sales reps quit, except upon receipt of their commission checks (and it was not unusual for the company to see several walk out once they had received the commissions).

ScottB is correct!

What do the commissions document say about payment of commissions at termination or voluntary separation? I know it sounds like semantics, but it's the specifics that matter here. It's my understanding that TN does not define "wages" to include commissions. So the final paycheck laws do not apply. What matters are the terms as outlined in your commissions agreement. If you do not receive your commissions, you are free to file an unpaid wage claim. My educated guess is that TN Department of Labor & Workforce Development will not intercede. As such you may have to file suit in civil court in order to recoup commissions not paid.

http://www.state.tn.us/labor-wfd/lsques.html#laborlaws

Excerpts from TN Department of Labor & Workforce Development:
What is the law concerning payment of final paychecks to employees?
Tennessee employees who are laid off, fired, or who quit must be paid their wages in full at the next regular payday, not to exceed 21 days from the date of their discharge or termination. Wages include vacation time earned by the employee. Claims against an employer for late payment may be filed with the Labor Standards Division. The Tennessee Department of Labor and Workforce Development has the authority to enforce this law. You may review this law at Tennessee Revised Statutes Title 50-2-103(g) (http://www.state.tn.us/labor-wfd/title50-2-103.htm)

If an employee terminates voluntarily or involuntarily, does the employer have to pay all wages due at the time of termination?
The employer is required to pay all wages or compensation due the terminated employee on the next regular payday following the date of termination or 21 days thereafter, whichever comes last.

If the employer refuses payment of wages, what can the employee do?
Anyone who has a problem collecting wages can file a wage claim with the Tennessee Department of Labor and Workforce Development's Division of Labor Standards. If the circumstances are such that we are unable to help, the complainant is referred to court.

ScottB is correct!

Sheesh, robb, you said that like it was unusual for me!;)

Wow, if Tennessee does not recognize commissions as wages, then the equation could get a little more complicated. A wage claim won't work, so what could someone then do? File in court, with the attorney's fees taking a big chunk of the change? That would stink, although not as badly as losing the commissions altogether (if entitled to be paid them in accordance with company policies).

Oh, okay, I missed the part about "compensation due," aside from wages. That should cover it.

ScottB, I don't debate your knowledge! I know you know your stuff!

My best guess is that someone in a similar situation could file in small claims court (if the amount is small enough). The court fees typically are minimal and you don't need a lawyer to represent you.

Here are the details of the Variable plan that concern me:

Adjustments and Exclusions to Commissions

"You will not earn or be paid a commission if an order is rejected. For purposes of this Plan, orders may be rejected or commissions and bonuses reduced or eliminated for a variety of business factors, which include, but are not limited to: payment terms, credit clearance, delivery schedule, selling price, unacceptable discounting, giveaways, etc. or any other business reason the Company identifies in its sole discretion."

"From time to time, it may be necessary, in the best interests of the Company, to identify specific sales situations as exceptions to the standard or commonly accepted basis of commission or to the standard payment schedule. These situations can include, but are not limited to, contracts won through special team and/or managerial involvement, contracts where special pricing or extra-ordinary discounting was involved, exceptionally large dollar volume contracts, or any other business circumstance the company identifies in its sole discretion. In these situations, the Company reserves the right to reduce or eliminate applicable commission and/or bonus payments at any time, including after the contract has been signed and/or performed. "

Language about termination:

"Notwithstanding anything to the contrary, a participant who is transferred to a new position or territory, or whose employment with the Company has terminated for any reason, shall receive commissions due as follows:

If the order has been booked, but all of the invoiced charges have not yet been collected before your transfer or termination, you will be paid the non-deferred portion of the commission but will not earn or be paid the deferred portion of the commission. Refer to your Summary for specific deferral rates."

What do you think ?

ScottB is correct!

Sheesh, robb, you said that like it was unusual for me!

Yeah, mlane did the same thing to me on another thread.

I thought we were all friends here! :D


No offense intended or taken; I think we're all just teasing each other here.

Language about termination:

"Notwithstanding anything to the contrary, a participant who is transferred to a new position or territory, or whose employment with the Company has terminated for any reason, shall receive commissions due as follows:

If the order has been booked, but all of the invoiced charges have not yet been collected before your transfer or termination, you will be paid the non-deferred portion of the commission but will not earn or be paid the deferred portion of the commission. Refer to your Summary for specific deferral rates."

What do you think ?
My best guess is that you'd only qualify for the non-deferred portion of the commission under your company's plan.