Sales Commissions Nightmares

Picture this: you’re in sales – or business development, or client relations, or strategic partnerships…. whatever you may call it, your job is to land clients, to close deals, to acquire customers – to get money in the door.

And you’re good at it. You know you are. Go ahead – blow that warm air on your fingernails and rub them against your lapel.

The company you work for has a commission structure. Get this much sales in the door, you get that many dollars for your efforts. You love this arrangement; you’re motivated by it. You work hard, knowing that for every long hour you put in, the company’s going to benefit, and you’re going to benefit.

Oh, but then there’s the fine print. You know, those pesky little throwaway sentences or barely intelligible legalese phrases you glanced right over when you were signing your new hire paperwork. Little gems like:

  • “this bonus is discretionary” or
  • “this bonus plan may be modified by management at any time” or
  • “if you’re not still working here when the client whose signature you got on the contract has fully paid, you don’t get the commission.”

What?! Did the contract really say that? How monumentally unfair! Can they get away with that?

The answer is – (you guessed it) – it depends. Sometimes you’re totally out of luck, sometimes there’s something you can in fact do about it, even though at first glance you may think you are stuck.

For one thing a lot can depend on which state’s laws apply. Sometimes it’s easy to tell and sometimes it’s not. Often if there is a written contract it will specify which state’s laws govern. Barring that, the default is usually that the state in which you are doing the work is the one whose laws govern.

But regardless of which state’s laws are at issue, often it comes down to how things are phrased on paper – or not. Some states require that commission agreements be in writing, and when that rule isn’t followed generally the presumption is in favor of the employee. If there is a writing, is the language perfectly clear? If not and there is an ambiguity, then you may be able to present evidence outside of the contract itself to provide context.

If you’re just going into a new job or otherwise have the opportunity to negotiate a written contract, it is incredibly important to not just sign whatever is put in front of you. We want things to be super clear, easily understood by someone outside of the organization, and written in your favor in a fair way.

If you’re leaving a job or the company is balking about paying a commission you believe you are entitled to, review your options with a lawyer. In some states, like New York and Colorado, a company that wrongfully withholds these commissions may be in violation of the states’ wage laws, which means that you could be entitled to recover not only what you were owed but also additional penalties and attorney fees as well. A lot of companies get away with not paying commissions and it’s not right. Don’t be afraid to stand up for yourself and lay claim to what you have earned – we’re here to help you do just that.

Written by Penn Dodson