If you’re a salesperson who works on commission in Michigan, there’s a good chance disagreement will arise if you’re employment contract is terminated. Questions can come up about what you’re owed and how much, regardless of whether the decision to leave was yours or your employers. It’s important that you understand what the employer is required to do under Michigan law.
Sales Representative Commission Act (SRCA)
Michigan adopted the SRCA in 1992. Its purpose is to make sure that you, the sales representative, are paid the commission you are owed. It sets out the timeline for when an employer must pay those commissions and is particularly targeted at those instances when an employment agreement is terminated.
The Act applies whenever an employee is paid by commission and defines commission as any compensation expressed as a percentage of sales or profits. But it is not always limited to percentage commissions. Sometimes, a commission is expressed as a fixed-dollar amount but this amount was originally derived from a percentage. If that’s the case, the SRCA may still apply.
If the SRCA does apply, it requires the employer to act within a specified period of time. When the employment contract is terminated, the employer has 45 days to pay all commissions which had accrued by the date of termination. However, some commissions may accrue even after termination. If this occurs, the employer has 45 days to pay them after they come due.
When an employer fails to fulfill the SRCA requirements, they are liable for damages resulting from their failure. And if they intentionally fail to pay outstanding commissions within the require timeline, they can be charged with additional penalty damages of up to $100,000.