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What "rights" does the employer have?

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  • What "rights" does the employer have?

    My husband and I own two retail stores which provide goods (flooring) and services (installation of flooring) to our customers. We have several salespeople who work with our customers to assist them in selecting the correct product for their particular situation. Our salespeople are paid on commission. They are given a "draw against commission" on a weekly basis. Their draw is determined by their individual sales history.

    At the end of any given month the salesperson's installed and paid-in-full jobs are totaled up (along with the profits derrived from those jobs) and the salesperson receives a percentage of those profits in the form of commission. (This policy is in writing in our Employee Handbook.) If the commissions due from the jobs exceed the draw that has been collected, the salesperson is given an additonal commission check. If the commissions due fall short of the draw that has been collected, the salesperson "goes in the hole" (they have a negative balance on their commission account).

    The salespeople work both inside and outside of the store(s). They generally work in the showroom every other day in order to wait on incoming customers and set up appointments with those customers to go out and measure the customer's home for flooring. On the alternate days, they go out on the appointments that they have set with the customers.

    We recently had a salesperson who quit working for us and is now attempting to collect unemployment compensation. This employee had managed to get himself "in the hole" to the tune of $30,000! His indebtedness to the company built up over a period of many months. His draw was a whopping $1500.00 per week. He was cautioned verbally many times that he was getting to deep "in the hole" and that we needed to look at making some adjustments to his draw. Every time that he was confronted, he would claim that he had a number of big deals coming through and that he would be able to get back on track.

    It should be noted that, from December of 2004 until July of 2005, the company was very short-handed on sales staff and management felt that they simply had no leverage with this salesperson; hence, he got deeper in debt with the company.

    With no significant progress being made by the saleperson by late July, my husband decided that things had gotten way out of hand. He called the salesperson in for a meeting to discuss the problem. In order to help this salesperson get back on track, my husband offered to "forgive" 1/2 of the deficit ($15,000.00) if the saleperson would give the company a check for the remaining $15,000.00. The salesperson said that he did not have that kind of money so my husband suggested that he take the weekend to come up with a solutiom of his own.

    The following Monday the salesperson did not come into the office nor did he have appointments outside of the store. My husband finally reached him and the two of them met in person to discuss the situation. Ultimately, the saleperson quit but wanted his "last paycheck". My husband refused to give him the check stating that he had already been overpaid by $30,000.

    The ex-employee, as I stated earlier, is now attempting to collect unemployment benefits. His initial claim has been approved even though we did submit our written protest. We are now approaching the appeals process. What rights does the employer have in a situation such as this? It just does not seem fair that a commissioned salesperson should be able to collect unemployment under these circumstances. Not to mention the fact that he has stated to other salespeople in our company that he plans to "take the rest of the year off"! (Lord knows that with $30,000 over and above what he earned, he should be able to take some time off!) I thought that you had to be actively seeking employment in order to draw unemployment benfits?!? Where does this underlying sense of entitlement that is so prevalent on today's society come from?

    Perplexed in Texas

    LHicks

  • #2
    Originally posted by LHICKS
    My husband and I own two retail stores which provide goods (flooring) and services (installation of flooring) to our customers. We have several salespeople who work with our customers to assist them in selecting the correct product for their particular situation. Our salespeople are paid on commission. They are given a "draw against commission" on a weekly basis. Their draw is determined by their individual sales history.

    At the end of any given month the salesperson's installed and paid-in-full jobs are totaled up (along with the profits derrived from those jobs) and the salesperson receives a percentage of those profits in the form of commission. (This policy is in writing in our Employee Handbook.) If the commissions due from the jobs exceed the draw that has been collected, the salesperson is given an additonal commission check. If the commissions due fall short of the draw that has been collected, the salesperson "goes in the hole" (they have a negative balance on their commission account).

    The salespeople work both inside and outside of the store(s). They generally work in the showroom every other day in order to wait on incoming customers and set up appointments with those customers to go out and measure the customer's home for flooring. On the alternate days, they go out on the appointments that they have set with the customers.

    We recently had a salesperson who quit working for us and is now attempting to collect unemployment compensation. This employee had managed to get himself "in the hole" to the tune of $30,000! His indebtedness to the company built up over a period of many months. His draw was a whopping $1500.00 per week. He was cautioned verbally many times that he was getting to deep "in the hole" and that we needed to look at making some adjustments to his draw. Every time that he was confronted, he would claim that he had a number of big deals coming through and that he would be able to get back on track.

    It should be noted that, from December of 2004 until July of 2005, the company was very short-handed on sales staff and management felt that they simply had no leverage with this salesperson; hence, he got deeper in debt with the company.

    With no significant progress being made by the saleperson by late July, my husband decided that things had gotten way out of hand. He called the salesperson in for a meeting to discuss the problem. In order to help this salesperson get back on track, my husband offered to "forgive" 1/2 of the deficit ($15,000.00) if the saleperson would give the company a check for the remaining $15,000.00. The salesperson said that he did not have that kind of money so my husband suggested that he take the weekend to come up with a solutiom of his own.

    The following Monday the salesperson did not come into the office nor did he have appointments outside of the store. My husband finally reached him and the two of them met in person to discuss the situation. Ultimately, the saleperson quit but wanted his "last paycheck". My husband refused to give him the check stating that he had already been overpaid by $30,000.

    The ex-employee, as I stated earlier, is now attempting to collect unemployment benefits. His initial claim has been approved even though we did submit our written protest. We are now approaching the appeals process. What rights does the employer have in a situation such as this? It just does not seem fair that a commissioned salesperson should be able to collect unemployment under these circumstances. Not to mention the fact that he has stated to other salespeople in our company that he plans to "take the rest of the year off"! (Lord knows that with $30,000 over and above what he earned, he should be able to take some time off!) I thought that you had to be actively seeking employment in order to draw unemployment benfits?!? Where does this underlying sense of entitlement that is so prevalent on today's society come from?

    Perplexed in Texas

    LHicks

    Not to be nasty, but are you accepting applications?

    I really don't know what the answers would be, considering Texas has some VERY stiff BK laws in the favor of the applicant.

    Check with a lawyer (I really think you'd have one for your business) and get their advice...And PLEASE, let us know what happens..I am very curious.
    If a worker is devoid of work, How then do they derive their value?

    Comment


    • #3
      Your husband was in the wrong, legally. There are no circumstances in which you can legally withhold wages for hours actually worked. The correct cause of action would have been to give him his last paycheck, but sue him for the $30,000 overpayment.

      Initial unemployment decisions usually go in favor of the employee. That doesn't mean you can't win on appeal. You DO have to be actively seeking employment to collect so if you have witnesses to support your claim that he's planning to take the rest of the year off, bring them to the hearing. If he's lying to the UI commission and claiming to be seeking work when he isn't, I"m sure they want to know that.
      The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.

      Comment


      • #4
        Originally posted by cbg
        Your husband was in the wrong, legally. There are no circumstances in which you can legally withhold wages for hours actually worked. The correct cause of action would have been to give him his last paycheck, but sue him for the $30,000 overpayment.

        Initial unemployment decisions usually go in favor of the employee. That doesn't mean you can't win on appeal. You DO have to be actively seeking employment to collect so if you have witnesses to support your claim that he's planning to take the rest of the year off, bring them to the hearing. If he's lying to the UI commission and claiming to be seeking work when he isn't, I"m sure they want to know that.


        I guess I am still a bit confused. The salespeople are not paid "wages for hours worked". The salespeople are paid a commission based on the profitabilty of any given job. It is, essentially, a commission-only job; however, we do give the saleperson(s) a draw (which is counted against their commissions earned) to prevent them from starving before they get a flow of jobs sold running through the "pipeline". What am I missing here?

        Thanks for any insight that you might be able to provide.

        Oh ... and a side note to "wage slave" ... we are accepting applications for upbeat, high energy salespeople. They are always in high demand. On the other hand ... I don't think that we will be allowing the same situation to repeat itself. Still interested? Thanks for your response as well.

        Still Perplexed in Texas

        LHicks

        Comment


        • #5
          Okay, thanks for explaining further. I had missed, or you had not explained, I'm not sure which, that there was no base pay and the compensation was commission only.

          That being the case, your husband may be on firmer ground, but I'm a little weak on commission-based structures; that's what I keep Patty around for.

          Hopefully she'll be able to provide more insight next time she comes by.
          The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.

          Comment


          • #6
            Thank you for any assistance you might be able to provide. I will keep checking back.

            LHicks

            Comment


            • #7
              Just had this happen with two employees who quit!!

              I believe that you need to clarify whether this person was an employee or an independent contractor to your business. To determine whether he is an employee or IC, you can view this link: http://www.dol.gov/esa/regs/compliance/whd/whdfs13.htm And this matters since that would affect the "unemployment" claim. It seems as if this employee has been able to gain access to unemployment wages, he was an employee in the eyes of the state -- at least so far? (Paid on a 1099 or W2?)

              Commissions are most often a civil issue in states. Draw deficits are generally not seen to be the same as improper salary overpayments. You would need to comply with the (preferably written) agreement between you and your employee that specifies the details of your agreement. You should have a clause that allows you to recover the draw against commissions (and if you don't now, you should consult an attny and add one moving forward to protect yourself, although you cannot do this retroactively for this situation).

              Even with an agreement, in most states the employee must have made minimum wage. In the event of a dispute, the employer must pay, without requiring a release, whatever final wages are due and not in dispute timely- no later than TX law requires. So you should really contact Texas Workforce Commission and get the right data for your situation. (One of our employees was in CA and we had to pay a day of salary for every day we withheld the "pay" despite the overpayment of $36k in commissions!)

              The pertinent law in TX was:
              § 61.015. PAYMENT OF COMMISSIONS AND BONUSES.
              (a) Wages paid on commission and bonuses are due according to the terms of:
              (1) an agreement between the employee and employer; or
              (2) an applicable collective bargaining agreement.
              (b) An employer shall pay wages paid on commission and bonuses to an employee in a timely manner as required for the payment of other wages under this chapter. Acts 1993, 73rd Leg., ch. 269, § 1, eff. Sept. 1, 1993.


              Here is the site for TWC - http://www.texasworkforce.org

              Good luck.

              Comment


              • #8
                Depends on whether or not the employee was exempt from the minimum wage requirement, most likely under the Outside Sales Exemption. See here for the criteria:
                http://www.dol.gov/esa/regs/complian...tsidesales.htm
                I don't respond to Private Messages unless the moderator specifically refers you to me for that purpose. Thank you.

                Comment

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