Are you paid on a commission basis? Have you encountered a problem at work about not being paid commissions that you believe you earned? At Gardner Employment Law, we can help you recover unpaid commissions that are rightfully owed to you. Feel free to contact us.
Termination Before Commissions Are Paid
For employees in sales positions, many times a substantial portion of their income is earned through commissions. Typically the company has a particular commission structure or formula. However, problems erupt when an employee is terminated before commissions are fully paid.
An employer cannot terminate an employee for the purpose of preventing him or her from being paid a bonus for which he or she worked. Texas law holds that an employee who does not resign or is not terminated for cause is entitled to payment of bonuses earned and unpaid. If the employment is terminated without cause, the employee is entitled to a pro rata amount of earned commissions for the portion of the year worked. Even if the terms of the bonus plan requires that an employee be employed to be entitled to a bonus, this does not prevent the employee from being paid a pro rata share of the bonus when the employee is terminated without good cause.
This is based on a principle of equity called “quantum meruit.” In that instance, an employee must prove that: (1) valuable services were rendered; (2) for the employer; (3) which services were accepted by the employer, used and enjoyed by him; (4) under such circumstances as reasonably notified the employer that the employee in performing such services was expecting to be paid by the employer.
Employer Changes the Commission Structure
Another problem arises when the company changes your commission formula without first notifying you. That is unlawful.
The Texas Supreme Court established a notice requirement in General Mills v. Hathaway. Before an employer can change the terms and conditions of employment, the employer first must provide the employee unequivocal notice of the changes beforehand. That gives the employee the opportunity to make a choice, whether to continue working under those conditions or not.
However, remember that with employment at-will, the employer can run the business the way management decides. Unless you have the benefit of an employment contract, your employer can change, even decrease, the rate of commissions after giving proper notice. Then you have the decision to stay or leave. If you continue to work under the new arrangement, you will be deemed to have accepted the new commission structure.