SERVING OUR CLIENTS AND COMMUNITY DURING COVID-19

Articles Tagged with sales commission lawyer

Employers are increasingly attempting to avoid having to pay sales employees their rightfully earned and owed sales commissions during the COVID pandemic. In many cases, a company has no legal basis to avoid paying sales representatives their earned commissions by unilaterally retroactively changing the terms and conditions of how sales commissions are earned because COVID related conditions result in an unexpected increase in sales. In these situations, a sales representative understanding of their legal rights is critical if he or she has any hope in recovering their earned commissions.

Employees who are paid through commissions rightfully rely on being timely paid their earned compensation. Commission structures also benefit employers by motivating employees to perform at or above company expectations, thereby increasing profitability for the employer and allowing the employer to identify and reward its most productive employees. The type of commission structure an employer uses can range from simple to complicated, and most of them are memorialized in employment agreements signed by both empB6D67F1E-7E48-4F4C-A59E-5470E7CCFEAF-300x169loyer and employee. Once an employee and employer agree to the terms of how commissions are earned and when they are to be paid, an employer cannot unilaterally and retroactively change the terms without breaching the contract or potentially violating wage payment law.  If an employer wishes to change the terms and conditions of a commission agreement, like any contract, they must give proper notice to the employee of the proposed change and obtain the employees clear consent to the new agreement. Often, employers who wish to alter commission structures do so to save money, which for the employee, means lower commissions and reduced income.

Sometimes, an employer is prevented from paying agreed-upon commissions due to unpredictable hardships outside of the employer’s control, like acts of terrorism or natural disasters that make performance of the contract impossible or impracticable. For an employer to protect itself from these unforeseen events, they may contain a force majeure clause in a sales agreement which potentially could release the paying party from its obligations when payment becomes impossible or impracticable.

A New Jersey District Court has allowed an independent sales representative to proceed with his lawsuit against his principal company for failing to pay his earned sales commissions.  This case reaffirms New Jersey’s strong public policy in assuring sales representatives are timely paid their earned sales commissions.

Prior to New Jersey passing the Sales Representatives’ Rights Act,  independent sales representatives often faced an uphill battle when it came to legal disputes concerning unpaid commissions. As an independent contractor who is paid on a 1099 basis, New Jersey Wage Payment law does not protect independent sales representatives from being paid their sales commissions because they are not considered employees under the law.  In recognizing the need to protect independent sales representatives from receiving their hard-earned commissions, New Jersey enacted the New Jersey Sales Representatives’ Rights Act that allows for sales representatives to sue for their unpaid earned commissions and imposes significant penalties against principals for failing to pay the commissions in a timely manner.

In the recent case TLE Marketing Co. v. WBM, LLC, No. CV-17-11752 Slip Op. (D.N.J. Sep. 14, 2018) the plaintiff raised a novel argument that, if successful, could expand the reach of the Act.  TLE Marketing Corporation is an independent sales agency based in Minneapolis, Minnesota, and has been providing marketing and sales representation for companies since 1976.  WBM, LLC is a developer, importer, and distributor of a variety of distinctive products, with a primary focus on Himalayan salt products.  WBM is based out of Flemington, New Jersey and has been in business for over 20 years.  Starting in 2007, TLE and WBM began working together, signing a sales representative contract that provided that TLE would market and sell WBM products.  The two companies enjoyed a lengthy business relationship of almost 10 years until, in June 2017, WBM terminated the sales representative contract.  In response, TLE filed a complaint in Minnesota alleging wrongful termination, breach of contract, and failure to pay commissions in violation of Minnesota state statute.

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