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Overpayment of Commissioned Salesperson

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  • Overpayment of Commissioned Salesperson

    Our company has had a commissioned salesperson work for me for the past 4 years. The salesperson took a draw against commissions and for the first 3 years, everything was fine. From June 2007 until April, 2008, the company paid the employee more in draw than the employee earned in commissions. In addition, the commissions were only to be paid when the customer fully paid the invoice from our company. Unfortunately, the employee had several customers that did not pay the invoices owed to the company. In addition, the employee had problems with shipments that management was not aware of and the company had to issue credits to the customers to cover the problems.

    The employee gave 2 weeks notice in April and we terminated him the same day. My question is, does the company have any recourse against the employee for overpayment of his draw against commissions earned?

    Our company is based in Maryland, but the employee lives in PA.

    Any suggestions???

  • #2
    Maybe. Your starting point is that all commissioned salespeople are not created equal (under the law anyhow).
    - Does the salesperson work inside or outside?
    - What does the salesperson sell?
    - Is there a contract?


    Past that, many companies legally base commission payments on net invoices actually paid. When I hear the some of the problems you have suddenly discovered after the termination occurred, my main thought is that you (the employer) really need to think this type of thing out prior to the work being done. Different states have very different rules on commissions, but you need to sort out the federal rules first (my questions above) and then figure out what your minimum legal requirements are. Generally speaking the legal requirements on Outside Sales persons are very different then those for Inside Sales persons. Outside Sales (per the FLSA law) are exempt from minimum wage and overtime requirements and Inside Sales mostly are not. There is nothing the employer or state can do to change this.
    "Reality is that which, when you stop believing in it, doesn't go away".
    Philip K. **** (1928-1982)


    • #3
      Did you have him sign anything to the effect that the draws were advances and any overpayment would be recouped at termination?
      I post with the full knowledge and support of my employer, though the opinions rendered are my own and not necessarily representative of their position. In other words, I'm a free agent.