Commission and FMLA

We have a sales person on pregnancy leave and I have a question about commission.  Are we required to pay her commissions on sales that come in after she goes on leave?  They are her accounts, but someone else is maintaining them while she is out.  We are in Georgia.

Comments

  • 9 Comments sorted by Votes Date Added
  • Yes. How your policy on commissions is spelled out will impact the pay however, ordinarily commissions already earned cannot be withheld.

    According to FMLA regulations, "any employer who violates [the FMLA] shall be liable to any eligible employee affected for damages equal to the amount of any wages, salary, employment benefits, or other compensation denied or lost to such employee by reason of the violation". (C.F.R. 825.400(c) ) Commissions are "other compensation".

    This was ruled on in a case in the 4th Circuit Court of appeals in March of 2001. "Because an employment agreement stated that the worker would receive commissions earned on sales to regular clients, the employer must pay them regardless of her leave status," the appeals court said.

    Estes v. Meridian One Corp., 4th Cir., No. 99-2662, <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />March 23, 2001) or I can email you the summary of the case.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

  • Let me get clarification so I do this right.  She is on leave.  Her accounts continue to send in POs after she leaves, and another sales rep is maintaining the accounts for her.  So, in that case, is she eligible for the entire amount of commission or is there leeway for the other rep to be paid for their effort also?

    Thanks for your input and help.

     

  • Let me give you the basics of the cited case so that you may see if it fits your circumstances.

    "An employee was entitled to receive commissions she earned while on leave under the Family and Medical Leave Act (FMLA), the 4th U.S. Circuit Court of Appeals held March 23. Because an employment agreement stated that the worker would receive commissions earned on sales to regular clients, the employer must pay them regardless of her leave status, the appeals court said".

    <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /> 

    "Estes worked as a sales agent and service manager for Meridian One Corp., earning a base salary and commission on her sales of office equipment and maintenance agreements. In March 1998, she was diagnosed with breast cancer, and underwent a mastectomy on May 8 and reconstructive surgeries in September and October. She exhausted all of her accrued paid leave in the process."

     

    The case goes on to reveal that the sales rep was retaliated against for taking FMLA and the company was sued. "She maintained that the employer owed her front pay, commissions, back pay, attorney´s fees and other damages."

     

    "Meridian (the company) asked the court to deny the jury´s award, arguing that an employee does not have the right to recover commissions that are earned while the employee is on FMLA leave.

     

    According to FMLA regulations, "any employer who violates [the FMLA] shall be liable to any eligible employee affected for damages equal to the amount of any wages, salary, employment benefits, or other compensation denied or lost to such employee by reason of the violation" ( §107(a)(1)(A)(i)(I)). The commissions constituted "other compensation" under the act, the court stated."

     

    "Meridian appealed, maintaining that Estes did not earn the commissions because the FMLA entitles an employee only to earned "compensation." Meridian argued that Estes could not earn commissions because she did not have any contractual right to receive them.

     

    "Estes provided evidence that she had earned the commissions represented by the jury´s award. She supplied the court with a list of invoiced sales that were made while she was on leave, showing that the invoiced sales generated several thousand dollars in employee commissions. Estes stated that she earned these commissions because she had prepared for the sales.

     

    In addition, Estes produced her named account list, which included 250 clients she regularly serviced. She testified that she had an agreement with Meridian to receive commissions on any sales that had been made to a client on her account list. Estes also stated - and produced documentary evidence to show - that other Meridian employees had received commissions on their account lists regardless of whether they were on paid or unpaid leave." (Estes v. Meridian One Corp., 4th Cir., No. 99-2662, March 23, 2001)

     

    Not knowing exactly what your pay policies are all I can offer is what this case appears to say.

  • Commission compensation is usually governed by the language in the commission plan and is not addressed directly in statute.  There are exceptions in some states, I don't know about Georgia.  Texas recently passed a law requiring commission plans be documented and a copy provided to employees on such plans.

    The case Cappy cited refers specifically to an agreement with the employer.  Do you have an agreement or written policy in place?  If you do and such agreement or policy does not exclude payment on leave (or after termination), you are probably stuck with at least some payments depending on what counsel advises (and that's who you should talk to if you don't have this ironed out in writing to solve this situation and also who you should talk to about writing up a policy or agreement that settles these issues in advance going forward).

    In general, FMLA issues should be handled as if the absence never occurred.  If you don't have something specific to the contrary that passes the smile test with your attorney, then I would follow this general rule.

  • The new amendments to the FMLA regulations may help you out on this one . . .

    The 2009 final FMLA regulations state that employees on FMLA leave are not entitled to any bonus or payment, whether it is discretionary or non-discretionary, when the bonus or other payment is based on the achievement of a specified goal such as hours worked, products sold or perfect attendance (assuming that the employee has not met the goal due to FMLA leave). Employers may deny such payment only if employees on an equivalent leave status (non-FMLA leave) are also denied bonus and incentive payments. DOL clarifies in the preamble to the final regulations that safety awards, like attendance awards are predicated on the achievement of a specified job-related performance goal, and therefore are to be treated similarly to attendance awards.

    Bonuses that are not premised on the achievement of a goal, such as a holiday bonus given to all employees, may not be denied to an employee because he or she took FMLA leave.

    (Source is BLR's FMLA Compliance Guidebook)

  • [quote user="californian"]The new amendments to the FMLA regulations may help you out on this one . . .

    The 2009 final FMLA regulations state that employees on FMLA leave are not entitled to any bonus or payment, whether it is discretionary or non-discretionary, when the bonus or other payment is based on the achievement of a specified goal such as hours worked, products sold or perfect attendance (assuming that the employee has not met the goal due to FMLA leave). Employers may deny such payment only if employees on an equivalent leave status (non-FMLA leave) are also denied bonus and incentive payments. DOL clarifies in the preamble to the final regulations that safety awards, like attendance awards are predicated on the achievement of a specified job-related performance goal, and therefore are to be treated similarly to attendance awards.

    Bonuses that are not premised on the achievement of a goal, such as a holiday bonus given to all employees, may not be denied to an employee because he or she took FMLA leave.

    (Source is BLR's FMLA Compliance Guidebook)

    [/quote]

     

    That sounds to me like commissions payable in the absence of a production quota still have to be paid since there is no specific achievement of a goal.  More details, please. :o)

  • Hmmm - looking at the regs now . . . Sec. 825.214

    Looking at the original question of whether sales commissions should be paid to an employee on maternity leave -- in the absence of a policy applicable to employees on equivalent leave status, I would go with prorating the commission to reward the employee on leave with the % commission attributable to her efforts prior to leave (the preamble to the regs approves this method).  I think this would be a reasonable approach for sales that "come in after she goes on leave" but are her accounts being maintained by another employee in her absence.

     If the employer's policy is to (for all types of leave) issue a blanket denial of commissions on sales that "come in" after the employee goes on leave, then I think a strict reading of the regulations says that the employer can deny payment of the commission based on the performance of a specific goal or products sold (i.e., "the sale" that comes in). This system is Draconian (in my opinion) and serves as either a disincentive to sell for anyone taking planned leave, or an incentive to rig sales so that they only come in before the employee goes on leave (or after he/she returns) . . . not a good solution. 

     

  • In the final analysis it would seem to me that the Virginia 4th Circuit Court of Appeals 2001 decision would stand even with the or especially with the regulation of the updated 2009 FLMA Sec 825.214 which is fully consistent with Sec. 825.400  Unless commissions are denied for vacations, sick leave, personal leave ETC., or if it is not spelled out in the commissions policy how the commission will be paid, then the original poster has to pay the commissions to the employee on FMLA.

    What I would like to know from the original poster is how are the company's commissions policies spelled out if the company has a policy. If there is no policy how will this information affect the thought process for the future?

  • [quote user="cappy"]

    [...]

    What I would like to know from the original poster is how are the company's commissions policies spelled out if the company has a policy. If there is no policy how will this information affect the thought process for the future?

    [/quote]

    I agree.  I don't think we can proceed without knowing OP's context of policy/practice/EE agreement.

    In either case, if there is no quota, I don't think there's a specific goal to be attained: all sales are payable.  In sales compensation, "goal" usually means "quota" but it can also mean "the level at which you hit your planned total compensation" or "the number you better hit or I will fire you."  I think only the first usage really fits the bill of goal attainment or specific performance in this context.

Sign In or Register to comment.