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Commission Sales Agreements
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Is your employer refusing to pay you commissions or bonus pay you earned? Is a non-compete agreement with your former employer preventing your from earning a living? For skilled legal advice, please contact the employment law attorneys of Huizenga & Hergt, P.C., today for a consultation. Our attorneys have successfully represented the rights of employees for nearly three decades. Let us put our skills and experience to work for you.
Sales Commissions — Resolving Commission Pay Disputes
Whether you are directly employed as a Sales Representative or are an Independent Manufacture's Representative, the law firm of Huizenga & Hergt, P.C., is prepared to take aggressive legal action to recover the commissions you are owed.
If your employment or agency has been terminated to avoid having to pay you the full amount of the sales commissions you have earned, you may have a case under Michigan's "procuring cause doctrine" to recover the commissions. If you have no agreement with your employer or principal concerning the payment of post termination commissions, you may still have a right to recover all the commissions that would be due you if your relationship was still ongoing.
In addition to bringing a case for breach of contract to recover commissions, you may also have a right under the Michigan Sales Representatives Commission Act (SRCA) M.C.L.A.§ 600.2961 to recover the amounts owed along with double that amount added on if you are not paid within 45 days of the date the commission agreement is terminated. This statute applies to the sale of goods, which means something tangible, not simply services. The prevailing party may also be awarded attorney fees and court costs as well.
The SRCA governs the payment of commissions by a principal to a sales representative, and provides in pertinent part:
- All commissions that are due at the time of termination of a contract between a sales representative and principal shall be paid within 45 days after the date of termination. Commissions that become due after the termination date shall be paid within 45 days after the date on which the commissions became due.
- A principal who fails to comply with this section is liable to the sales representative for both of the following
(a) Actual damages caused by the failure to pay the commissions when due. (b) If the principal is found to have intentionally failed to pay the commission when due, an amount equal to 2 times the amount of commissions due but not paid as required by this section or $100,000.00, whichever is less.
The law protects verbal as well as written sales commission agreements. In the absence of a written agreement, the parties' oral agreements and conduct can establish a binding contract.
Because employees are terminable-at-will in most situations, employers often take the position that they can do whatever they want without fear of reprisal. They can agree to pay an employee extra money if they achieve a certain goal then change their minds later and refuse to pay even after the goal is achieved. In fact, once the employee has performed the requirements needed to receive the bonus, the contract has been performed and must be honored by the employer.
This is really not a new legal theory but is known as a unilateral contract. One party makes a promise; the other party does an act or refrains from doing an act in reliance on that promise. For example, A says to B, “ I will give you $20.00 for cutting my lawn.” B cuts A's lawn. There is now a unilateral contract between A and B, and A is liable on his promise to pay $20.00 for the work.
This theory was applied to the employment situation by the Michigan Court of Appeals in the case of Mahnick v. Bell Company, 256 Mich App 154 ( 2003). Although every employment situation will have its own unique set of facts, employees are not without recourse if an employer violates a verbal contract.
Michigan and many other states recognize the validity of agreements which prohibit employees from obtaining employment from a direct competitor after termination of employment or setting up their own business in direct competition with the former employer.
The agreement not to compete must be “reasonable as to its duration, geographical area and type of employment or line of business.” MCLA 445.774a.
The important thing to remember is that these agreements are enforceable even if the employee is involuntarily terminated! Employees sometimes assume that these agreements only apply if they leave voluntarily; this is not the case
The statute itself does not define what is a reasonable duration for a non-compete agreement, nor does it specify a reasonable geographic area or reasonable limitation on type of business covered. What is reasonable is determined on a case by case basis by the courts as these agreements are litigated. What is reasonable in one business may not be reasonable in another. There are no hard and fast rules or guidelines only case by case interpretation by the courts which evolves and changes.
Non-compete agreements are especially onerous when an employee is involuntarily terminated. An employer can prevent an employee from working in his profession for a year or more, depending on the business. And, the employer is not required by law to provide the employee severance pay during this time.
Although non-compete agreements are legal, we think they are unfair and fight to have them eliminated or reduced and have the employer extend severance pay throughout the time the non-compete agreement is enforced.
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For high quality legal representation and responsive client service, contact the employment law attorneys at Huizenga & Hergt, P.C., today.