Unpaid Commissions & Bonuses
Commissions and bonuses are forms of compensation paid to employees or independent contractors, especially those in an executive, sales, or broker position. The amount, timing, and entitlement to commissions and bonuses are generally provided in a written agreement, such as an employment agreement or compensation agreement. Verbal agreements to pay commissions and bonuses are generally enforceable. Post-employment entitlement to commissions or bonuses is often an area of dispute between companies and individuals.
WHY HIRE CANTRELL ZWETSCH
We know the laws concerning commissions and bonuses, as well as industry standards for amount, timing, and entitlement. We routinely provide commission and bonus related counseling and litigation services. Our clients range from entrepreneurs, sales producers, recruiters, financial brokers, and real estate agents to c-suite executives and Fortune 500 companies.
We have experience across most industries that commonly utilize commission and bonus incentives, including staffing/recruiting, financial services, technology, manufacturing, transportation, logistics, entertainment, professional sports, and real estate.
Below is an overview of: (i) examples of commission and bonus disputes we handle; and (ii) frequently asked questions.
WHAT WE HANDLE
The commission and bonus dispute attorneys at Cantrell Zwetsch, P.A. regularly advise and litigate commission and bonus disputes. Examples of the specific types of commissions and bonuses disputes we handle include:
Sales Commissions and Bonuses
Commission and bonus structures vary widely, with some tied to percentages of individual, department, or company-wide revenue, gross profits, or other metrics of production. The requirements, amounts, timing, and other circumstances under which commissions and bonuses are earned are typically defined in a written agreement, such an employment agreement or compensation plan. Verbal agreements, however, are also generally enforceable.
Often, employers, executives, and sales representatives misunderstand their obligations and rights with respect to when commissions or bonuses must be paid. For example, many companies do not recognize that, absent an agreement to the contrary, earned commissions or bonuses generally must be paid even after an employee separates employment or independent contractor ceases work. We have a deep bench of attorneys who are familiar with the nuances of entitlement to commissions and bonuses.
We frequently represent both sales representatives/agents and companies with claims for unpaid commissions or bonuses.
We represent clients with all forms of compensation disputes, including those involving executive pay. C-suite and other upper-level management are often awarded robust compensation and benefits packages. Common components of executive pay often include bonuses, commissions, equity and stock, qualified and non-qualified deferred compensation, and other retirement benefits.
Unlike most other firms, our attorneys are familiar the complex sets of laws that govern many aspects of executive pay, including the Employee Retirement Income Security Act (ERISA), Sections 409A, 280G & 499 of the Internal Revenue Code, as well as Dodd Frank and other SEC regulations. We have a history of success when negotiating and litigating executive pay.
Recruiter/Staffing Commissions and Bonuses
Some companies routinely use outside recruiters or staffing firms to find top talent or temporary staff. When a recruiter submits a candidate to a company and the candidate is hired, the recruiter is owed a commission, often called a placement-fee. Recruiters structure fees in many ways, typically based on a percentage of the candidate’s salary or a flat fee. Percentages vary based on industry and position. For example, placements of executives or professionals typically command a placement fee of 10% – 25% of the placement’s first year salary.
When recruiters or staffing firms are not paid for their services, they may be able to file a lawsuit for unpaid commissions or placement fees. Attorney fees are often recoverable under the terms of the contract or other legal mechanisms. We have substantial experience winning disputes over recruiter and staffing commissions and placement fees.
Real Estate Agent/Broker Commissions and Bonuses
Real estate agents and brokers earn a percentage commission or transaction fee in connection with the sale or lease of personal or commercial properties. Commissions are usually based on the property’s selling price. Transaction fees are usually flat fees and occur when a buyer is already located. The terms of the commissions or fees are typically contained in a listing agreement or purchase agreement. Listing agreements may also give an agent or broker an exclusive right to list, market, and sale a property, sometimes with that right limited in duration.
Disputes often arise over payment of commissions or fees when a seller or buyer contests whether the agent or broker was responsible for procuring the buyer. We represent clients, such agents and brokers, who need an experienced real estate commission dispute attorney to recover unpaid fees.
Drafting Compensation Plans
We also counsel companies on drafting compensation plans, including commission plans, often in connection with preparing or revising employment agreements and restrictive covenants. We do more than simply ensure the policies accurately reflect the intent of our corporate clients; we also address issues with an eye towards mitigating potential disputes by assessing and clarifying areas of ambiguity or oversights. This approach ultimately saves our clients’ money by avoiding disputes, without reducing the incentives that commissions and bonus structures are designed to provide.
FREQUENTLY ASKED QUESTIONS
Am I entitled to commissions post-employment?
There are often disputes on entitlement and amounts of commissions that might be due to an individual after leaving a job. This is common in industries where a sales representative obtains customers that pay for services or products monthly (e.g., insurance policies) that create so-called commission tails. It is also common with sales representatives who are paid commissions on a quarterly basis.
Generally, commissions must be paid even after an employee’s or contractor’s work relationship ends with a company – unless a mutual understanding to the contrary exists. There are several ways a company may ensure a mutual understanding is established that commissions are not due post-termination. For example:
- A signed agreement that contains language indicating no commissions are due post-termination.
- An acknowledged employee handbook or set of policies with language that commissions are not due post-employment.
- The individual is responsible for not only making sales, but also for providing the services associated with the sale, such as a service contract.
- There is a recognized custom in the industry that individuals are not entitled to commissions post-employment.
The above examples are situations in which the parties have a mutual understanding that commissions are not due post-termination. Absent a mutual understanding, however, an individual may be entitled to commissions even after leaving their job.