A commission rate tells only part of the story. The terms that matter most define when you earn a commission, when it’ll be paid, and what happens to deals still in progress when your employment ends.
A New York commission agreement should answer those questions in writing before you rely on projected income. Clear terms also provide a foundation for resolving disputes over unpaid commissions.
Start with the Written Agreement
New York requires a commission salesperson’s employment agreement to be written and signed by both the employer and the salesperson. A verbal promise is harder to prove and leaves room for disagreement after a sale closes or compensation terms change.
The agreement must describe:
- How wages, commissions, draws, and other money are calculated
- How often payment occurs
- How often a revocable draw is reconciled
- The payment terms when employment ends
Before signing, make sure the document answers each point rather than referring generally to a policy you haven’t received.
The document should also define terms such as net sales, collected revenue, qualified lead, cancellation, return, split credit, and chargeback if they affect your pay.
The employer must keep the agreement during employment and for at least three years after termination. If the employer can’t produce it to a New York State Department of Labor investigator, the law creates a presumption favoring the salesperson’s account of the terms. Keep your own signed, final copy, including every attached plan, exhibit, and later addendum.
Identify Exactly When a Commission Is Earned
A commission is earned when the written agreement says it’s earned, not automatically when a salesperson closes a deal. This distinction matters because earned commissions are wages under New York law and remain payable after employment ends. The agreement governs commissions that haven’t yet been earned.
A plan might make a commission earned when the customer signs a contract, pays an invoice, receives a product, or passes a cancellation deadline. Each event creates a different financial risk, particularly when payment depends on circumstances the salesperson doesn’t control.
If the agreement doesn’t identify the earning event, prior dealings between the employer and salesperson may control. Without prior dealings, New York generally treats a commission as earned when the salesperson produces a person ready, willing, and able to contract on the employer’s terms. A clear written provision avoids having to reconstruct the parties’ intent later.
Ask for written answers to these questions before signing:
- What precise event makes the commission earned?
- What happens to pending deals if I resign or am terminated?
- Who receives credit for renewals, account reassignments, and shared sales?
- Can a later cancellation or nonpayment reverse a commission that was already earned?
Review Payment Timing, Draws & Reconciliation
Employee commission salespersons must receive earned wages, salary, commissions, and other money under the agreed employment terms. Payment must occur at least monthly and no later than the last day of the month after the month in which the money was earned. Compare these requirements with the plan’s payment schedule, especially if it uses monthly, quarterly, or post-collection reporting.
A draw is an advance against future commissions. Distinguish a nonrecoverable draw, which creates no repayment obligation, from a recoverable draw or another advance that will be reconciled against future commissions.
Under New York guidance, a draw against commissions may be reconciled only against future commissions. It can’t be recouped from other earnings as an ordinary wage deduction. A recoverable draw arrangement should state how often reconciliation occurs and whether the employer claims any remaining balance after the employee leaves.
Once you begin work, save commission statements and pay stubs. Compare the employer’s calculations, reconciliations, and payment timing with the signed plan.
Determine Which New York Rule Applies to Your Role
The rules for employees and independent contractor sales representatives differ. Your title alone doesn’t determine your classification for wage-law purposes. Review both the relationship described in the agreement and how the work will be performed.
For an independent contractor sales representative, New York Labor Law Section 191-c separately requires a written contract identifying the method of commission payment. Earned commissions must be paid within five business days after termination or within five business days after becoming due.
That deadline differs from the employee commission payment framework. The agreement should identify the parties, state whether the role is employment or a contractor relationship, and not leave classification to an informal understanding. This article provides general information. Agreement terms and worker classification can affect legal rights, so the applicable rules depend on the individual circumstances.
Resolve Missing or Unclear Terms Before Signing
Don’t rely on a recruiter, manager, or supervisor to fill in a missing commission term verbally. Request clarification by email and ask that the answer be incorporated into the agreement, an addendum, or another document both sides can retain.
Resolve these provisions before you sign:
- The formula, including the revenue base, rate tiers, territory rules, and split-credit rules.
- The earning event and the date on which the commission becomes payable.
- The process for cancellations, returns, customer nonpayment, and chargebacks.
- The draw amount, reconciliation schedule, and any claimed repayment obligation.
- The treatment of pipeline deals, renewals, and assigned accounts after separation.
- The employer’s ability to change the plan and the effective date of any change.
Preserve the offer letter, commission agreement, pay stubs, commission statements, emails, internal policies, written promises from supervisors or human resources, and screenshots of commission dashboards. If the plan changes, retain the revised version and any electronic acknowledgment alongside the original.
If a dispute develops, New York Labor Law generally provides six years to bring an action to recover wages, benefits, wage supplements, and liquidated damages under Article 6. A successful wage claim can include unpaid wages, reasonable attorney’s fees, prejudgment interest, and liquidated damages equal to 100 percent of the wages found due unless the employer proves a good-faith basis for the underpayment.
Know When to Seek Legal Review
Consider legal review when a plan conditions commissions on events outside your control, authorizes broad chargebacks, changes an existing compensation arrangement, or says little about post-termination commissions. Advice is also valuable when an employer refuses to provide a signed agreement or asks you to accept terms that conflict with prior written representations.
We examine pay stubs, job descriptions, commission statements, and messages about compensation to determine what the governing documents say and whether a wage issue exists. Addressing unclear terms before accepting a role can prevent a later dispute over expected compensation.
If you need assistance reviewing commission terms or pursuing unpaid compensation, Brown Kwon & Lam provides direct access to the attorney handling your case. Contact our team at (212) 295-5828.