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Does Your Employer Owe You Commissions?

The Great Recession seems to have spawned an increase in commission disputes.  This could be because money is tight and employers are looking for reasons not to pay their employees, or it may be that more people are out of work and can now assert such claims without fear of losing their jobs.  Whatever the reason, I thought it might be helpful to give an overview of the law in Texas as a it relates to the payment of commissions for employees-at-will, i.e., those employees who do not have a contract of employment for a specific term. Commission agreements can be verbal. Contracts for the payment of commissions do not have to be in writing to be enforceable.  The issue is almost always, "What was the agreement of the parties?"  If you were told by your employer you would receive a commission of 10% of gross sales, that is your agreement.  Legally, it doesn't matter that it's not in writing, although it may matter when it comes to proving the terms of the agreement. When a commission is owed. An recurring issue in commission cases is the issue of when the commission is owed.  Is the commission owed when the sale is made, when the customer is invoiced or when the customer pays, or at some other time?  This issue is resolved by ascertaining the agreement of parties.  If the terms of the commission agreement are in writing, and clearly state when the the commission is owed, and the course of conduct between the parties is consistent with the writing, there should be little dispute.  You would be surprised, however, how often employers fail to put their commission plans in writing. When an agreement can be changed. Unless you have a written agreement to the contrary, if you are an employee-at-will, your employer, after notice to you, can change the terms of your commission agreement at any time and by remaining employed you impliedly agree to those new terms.  There are two exceptions however.  First, an employer cannot change the terms of your agreement retroactively, only prospectively.  If you have already closed a sale, you are entitled to the commission upon which you previously agreed.  Second, if your employer terminates you immediately before a sale to keep from paying you a commission, you are likely to be able to recover part or all of the commission you would have been due but for the termination. I hope this helps clarify this issue for you.  Small employers can take a big step toward avoiding litigation on these issues by simply putting in writing the terms of the commission plan, ensuring their employees receive the plan and, of course, complying with their obligations to their employees under the plan.  GSF

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