Commissions - terminated employees

sbt

My client is a writing an employment manual using a boiler plate. When he gets to the area about paying terminated employees it is ambiguous about commissions. It is the norm that commissions are paid upon collections which have an average of 45 days after the sale and in the case of delinquent accounts can take several months. Traditionaly he has discontinued commissions effective immediately upon termination and his employment manual says so. My client has commissionable employees in 14 states. Does the FLSA address commissions at all? How do those of you who have multistate employees deal with this issue in your handbooks and/or sales contracts? Thanks


[email]sbturner@ix.netcom.com[/email]

San Francisco

You may want to check state law regarding commissions. In California, commissions are considered wages and must be paid even though the employee has been terminated. However, the Labor Commissioner does recognize that payment of commissions is not paid until the customer has paid so the commission may be delayed until that payment is received.

Our company does not pay commissions, but we do pay store managers bonuses that are based upon the stores quarterly sales. As such, these bonuses are also considered wages and must be paid even though the manager is no longer with the company. While we operate in 6 states, we treat all the same.

This is not paid of our handbook which is relatively general.


Elizabeth

Theresa Gegen TX

In Texas, pay of commissions will be based on the agreement or policy between the employer and employee.

The policy needs to be very specific about when commissions will be paid. It is not uncommon for employers to have policies that state that an employee must be employed on the date the payment is due in order to be paid. These have been upheld by the courts. However, an employer can run into trouble if an employee has made a big sale, then shortly thereafter (before goods are delivered or payment is made), gets fired. The employee may sue for breach of duty to pay commissions.

Continuing to pay for 45 days or 90 days on collections seems pretty fair -- and would be enforced as long as the agreement is specific.

Good Luck.