Failure to Pay Commissions

As New York wage and hour violation attorneys, we know how detrimental it can be for an employee when an employer fails to pay commission. If you believe you have been cheated out of commission that is rightfully yours, Brown Kwon & Lam can help.

What is a Commission?

The Muse defines commission as “additional compensation that’s earned based on job performance.” Often, a commission-based role is created via an employment contract which includes the terms dictating how you will be paid a set amount of money, often dependent on hitting employment goals such as the amount of product sold, clients booked, etc. Your employer should be paying you this commission monthly, quarterly, or yearly.

What New York laws exist defining requirements for commissions paid?

New York State Labor Law Article 6 establishes the requirements for the payment of wages to commission-earning employees. Under the law, commission employees are “principal activities” that include any sales the employer pays in whole or in part on a commission basis rather than a salary or wage basis. Supervisory, managerial, executive, or administrative roles are not included in this Labor Law.

Labor Law requires that all agreements of payment be in writing and signed by both the employee and employer. The written agreement must include:

• A description of the calculations for an employee’s wages, salary, drawing accounts, commissions, and all other forms of payment;
• An explanation of how the employee will get their regular pay;
• How often reconciliation will occur (if applicable); and
• Any other relevant details of payment of wages, salary, drawing accounts, commissions, etc. when the employment ends.

While employers shouldn’t have issues paying New York employees, the reality is that issues still exist in the workplace.

When Employers Fail to Pay Commission Earned

Though limited deductions may be taken from commissions earned under Section 193 of the Labor Law, it is important for commission-earning employees to pay close attention to the details of their employment contract to ensure that they are not being subjected to deductions that they should not be.

Remember, any commissions earned by you must be given to you, even if the employment relationship ended via termination or choosing to seek a new position. However, the language within your contract determines how and if you earned commission.

In addition, there are other forms of commission withholding that you need to be mindful of:

• Draw Against Commissions: A draw against commission is a payment of credit, in whole or in part, against future commissions. These typically function as an advance. Draws are only reconcilable against future commissions; should an employee leave the company, he or she does not have to repay this. Recoupment is illegal unless explicitly included in the employment contract.
• Minimum Wage and Overtime: New York State minimum wage and overtime laws apply to commissioned salespersons; there is no exemption from minimum wage and overtime requirements for outside salespeople. This means that yes, you do have to pay minimum wage to a commission employee. However, an employee can be both a commission salesperson and an outside salesperson, depending on the employment agreement.
• Bonus: Any money an employer gives to an employee at their own discretion is a bonus. Money given for job duties they perform is considered commission.

What happens if my employer does not pay me my money?

If your employer fails to pay you your money or follow the regulations set forth under Section 191-C, Payment of sales commission, the employer is liable in a civil action for double the damages incurred. You may also be able to recover reasonable attorney’s fees, court costs, and disbursements.

These cases can be difficult, but that doesn’t mean your rightfully earned commission should stay in the hands of your employer.