Commissioned Salespersons: Getting Hired, Fired, and Paid

by Bryan Lane Berson, Esq.
Download PDF: Commissioned Salespersons

A. Researching the Company

Before beginning to work as a salesperson – as an employee or independent contractor –carefully research the company for which you plan to sell products. Your compensation depends on the merchandise, shipping, and prompt, accurate payment. If possible, ask customers whether they are receiving their orders promptly and whether they return merchandise. Ask former sales representatives about their experiences with the company.

B. Contracts

Unless you have a written contract that provides for a definite term of employment, employment is at will. A company can discharge you at any time without cause.

Most companies and their sales representatives have oral contracts. A written contact enables sales representatives to better prove the terms of their agreement. If you cannot get a written contract, you can send a confirmatory letter confirming important terms of employment. When negotiating a contract or sending such a letter, make sure that you are dealing with someone who has authority to bind the company. It is wise to have an attorney negotiate on your behalf.

C. Some Important Terms

Understand how commissions are calculated, when they are payable, what will be deducted from them, and circumstances under which commissions will be split. To ensure that commissions are properly calculated, you will want to receive copies of invoices after shipment to verify their accuracy. Similarly, you will want to understand what expenses are reimbursed.

Define the sales territory including its geographic scope and whether you will you earn commissions for all sales made in it. You will want the company to notify you if it believes corrective action is required and notice of termination before being severed.

D. Termination and Compensation

When the professional relationship is terminated, a salesperson has a right to a final accounting and payment of commissions owed. In New York, compensation is payable within five days of the last day of employment. Some states have enacted sales representative protection statutes that entitle salespersons to a multiple of their wages that were not properly paid plus collection costs.

If you performed services or spent money that benefitted the company, expected to be paid, and were asked to perform the services, and it would be unfair for the company to retain the value without payment, you can recover the fair value of your services.

Even where the employment is at will, a company cannot terminate a salesperson in bad faith to avoid payment of compensation. If you do not receive proper notice as required by the contract, you may be entitled to continued compensation.

E. Enforcing Your Rights

If severed, do not disparage the company. Do not deposit or cash a check that says “full payment” in the memorandum without consulting an attorney. Gather all of your documentation, and review it to determine if you were given proper notice and compensation. An attorney can help you document your protests and claims in an articulate manner.

If you need to negotiate an agreement or obtain unpaid compensation, I can help.

About the Author:  Bryan L. Berson, Esq. is an attorney and mediator at The Berson Firm, P.C., a law firm that handles estate administration and planning, real estate, commercial transactions, and commercial litigation.  His e-mail is bberson@bersonfirm.com.  His phone number is (631) 517-1055.  Connect with The Berson Firm on Facebook and Bryan L. Berson on LinkedIn.  The firm’s website is www.bersonfirm.com.

Disclaimer:  Constructive Knowledge is published by The Berson Firm, P.C. (the “Firm”).  The information contained in this column is provided for informational purposes only.  It is not tax or legal advice on any subject matter.  No readers, clients or otherwise, should act or refrain from acting on the basis of any content without seeking appropriate legal or other professional advice with respect to one’s particular circumstances.  This column reflects a general discussion of the law in New York.  It may not accurately reflect the law of other states.  The content is general information and may not reflect current legal developments, verdicts, or settlements.  The Firm expressly disclaims all liability with respect to acts taken or not taken based on any or all content of this column.  This column is Attorney Advertising.  IRS Circular 230 Legend:  Nothing in this column is intended to be used and cannot be used to avoid U.S. federal, state, or local taxes.  It was not written to promote, market, or recommend any tax planning strategy or action.  Copyright:  All rights reserved.  No part of this publication may be reproduced without prior written consent.  Readers may share this column through, but not limited to, social networks.

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