How Should I Handle Commissions for a Salesperson Who Quit?
Question: We had a salesperson quit recently. We want to make sure that we pay them fairly, but also don’t want to compensate them for things we don’t need to pay them for. So, the big question is, do we need to pay them for jobs that are incomplete or installations that we haven’t started working on yet?
Answer: It’s always best to have a written payment and/or commission plan for salespeople to avoid any confusion or claim for unpaid compensation. A first step is indeed to refer to the compensation plan, if there is one, and if it deals with scenarios such as the ones raised here.
If we assume there is no formal plan here or that the plan doesn’t encompass the questions raised, then we can look to past practice. We’ll further assume there’s no past practice or that past practice doesn’t quite answer the question. Nonetheless, it’s possible other salespeople have left the company in the past and the question of paying for incomplete or not-yet-started jobs has arisen before.
If we phrase the question in purely legal terms, the issue is whether the employee has a contractual right to be paid for jobs that haven’t been completed, or even started. “Contract” doesn’t necessarily mean a written document; it can refer to a mutual understanding between parties.
If there’s no semblance of a contract, courts also look to what seems fair in wage disputes. So, for example, if a job has been started but not yet been completed, can we say that the salesperson has done his or her job in selling the project, that whatever occurs with the project after the sale is not within the control of the salesperson? If so, then arguably, fairness suggests the salesperson should be paid. If a job has not yet been started, but again the salesperson’s role is complete and he or she has no control over whether the job is commenced much less completed, then arguably the salesperson should be paid.
All of this having been said, an option is simply to compensate the former salesperson later, meaning after the job has been completed.
It should be readily apparent after this overly lengthy dissertation that the best thing to do is have a written policy that clearly sets out expectations and obligations.
This response is intended for general informational purposes only and should not be construed as legal advice or a legal opinion, nor is this column a substitute for formal legal assistance. For help with legal needs, members are invited to consult with ACCA’s LegalTools Counsel, Brooke Duncan III. Mr. Duncan can be reached at 504-585-0220 or by email at firstname.lastname@example.org.
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