Can your former employer withhold commission payments?

| Sep 19, 2019 | Firm News |

For most commission-based workers in Michigan, commission payments are their main source of income. For this reason, it is essential that they receive their final commissions shortly after ceasing to work for the employer, whether the cessation is by choice or termination. Unfortunately, many employers feel they are entitled to the entirety of the profits from a sale earned through the efforts of a former salesperson. If you are in a situation in which you are unsure if you will receive the commission payments you rightfully earned, it is essential that you understand the law and your rights.

Per the Revised Judicature Act of 1961, “commission” refers to the compensation you accrue by soliciting orders for or selling a product in Michigan. The employment or contractor contract should state the percentage of profits to which you are entitled for each sale. The contract should also specify when the commission becomes due, as this provision will affect the timeline of events following your termination or quitting. If your contact does not specify when commissions are due, prior practices between you and your former employer will dictate the timing. If prior practices do not exist, statewide customary practices will prevail.

In accordance with state law, your former employer must pay all commissions you earned within 45 days of the date of termination. If any commissions come due after your last day of work, your former employer must pay them within 45 days of the date they became due.

If the employer fails to comply with these laws, he or she will also owe you actual damages. If an investigation reveals the employer intentionally failed to pay the commission when due, he or she will have to pay you two times the amount of the commissions you earned or $100,000, whichever is less. If you bring a cause of action against the employer and win, the employer will have to pay for court costs and attorney fees. If a provision in your contract purports that you waive your right to collect commissions post-employment, the courts will render the provision void.

You should not use this article as legal advice. The content is for educational purposes only.