Articles Posted in Commission and Pay Disputes

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A commission is an amount of money that is paid to an employee upon completion of a task, usually the task of selling a certain amount of goods or services. It can be paid as a percentage of the sale,  a flat dollar amount based on sales volume, or based on any formula that the employer and employee agree upon. Some jobs are 100% commission based, but the vast majority are not. Most sales jobs will offer you “base salary.” This is what the employer pays you as a based in addition to the money that you earn from your commissions. Employers often use sales commissions as an incentive to increase worker productivity. When a commission is paid in addition to a salary, it may be included in the employee’s paycheck or, paid on a separate schedule, usually bi-monthly or monthly.

Working for commission pay has many advantages for highly motivated and talented salespeople, with the most appealing aspect of this type of compensation plan being that you can leverage the risk to make quite a bit of money, if you are very good at your job. However, the are a lot of risks that come with a position that is heavily compensated by commission. One such risk is that many employers attempt to wrongfully withhold commissions even though they have been earned and are payable to the employee. The most common time this happens is when the salesperson (or account executive, broker or any other of a number of terms used to describe an employee who works mainly on commission) make a sale and then is either fired or quits prior to the commission being paid. While each case is different, most cases require a lawyer to resolve this type of dispute because the basis for the recovery is based on many factors, the law, and the application of the specific facts of the case to the law. A copy of your employment contract, and any commission plan or schedules that you were working under are important first steps in analyzing this type of situation.

We have litigated cases involving these legal issues with small local companies and large multi-national companies alike. Many of the tactics used by these companies are unlawful under Georgia law. Often, the only recourse if you want to get paid is to hire an attorney who knows the laws in Georgia as they apply to unpaid commissions and other monies owed and sue the company for your money.

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Most highly compensated commissioned salespeople work long and hard to obtain results for their company which result in sales and revenue to the company. In turn, the company pays the salesperson a pre-determined amount of the sale in the form of commissions to the salesperson. (Note: I use “salesperson” as a generic term as most large corporations refer to highly compensated salespeople as account executives, financial advisors, consultants, agents, real estate agent, broker, representative, sales rep, etc. No matter what the title, if an employee or 1099 contractor is selling goods or services for a company, they are covered under the laws of Georgia and are entitled to be paid for the sales that have been earned and payable under their agreement with the company).

One of the common situations that we see under this arrangement is when a salesperson leaves the company after a sale is made but before being paid the commissions. Most times in this situation, the company refuses to pay the commission. While each case is different and very fact-dependent, many times the company refuses to pay the commission even though they have no legal basis to do so. In other cases, the company, feeling as if they have the upper hand in the negotiations, offer the salesperson a fraction of what they are owed, and conditions the payment on the salesperson signing a release which releases all future claims against the company for anything that may have happened up to the time of the signing of the release, including the refusal to pay the full amount of the commissions owed. Legal counsel should be sought by anyone who is in this position and is presented with a release, as there are too many potential pitfalls. Sometimes, the release adds additional restrictive covenants that were not in play prior to the signing of the release which restricts the ability of the salesperson to compete against her former employer, or work in certain industries or markets which may be important to her livelihood. This is an especially common tactic when the amount owed is not substantial, since a potential client’s ability to retain legal counsel in these situations is limited due to the amount of money in controversy. In other words, if there is not a lot of money at stake, a law firm such as ours, will not be able to get involved as the economics just do not make sense and the company sometimes realizes this and does not treat the leaving employee fairly.

Many of the clients who we represent in these types of cases work for Georgia corporations but live in other states. However, the most common situation is a client who lives and works in Georgia for an out-of-state large corporation. Choice of law provisions are important in this type of case as the law that applies may determine where the suit can be filed, which states’ substantive law applies and, ultimately the outcome of the case.

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INTRODUCTION

Many times, disputes over large amounts of money are subject to a contract that is not well written and which is unclear and ambiguous. The question then becomes, how will the Court construe the contract clauses which could decide the lawsuit in favor of the plaintiff or defendant.

APPLICABLE LAW

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One of the legal areas in which I most enjoy practicing is commission disputes. Before going to law school, I spent a few years as an account executive with AT&T selling computer equipment and related telecommunications equipment. During that time, more than half of my income was earned through commissions and bonuses based on a number of complicated commission plans that included commissions based on sales volume and quota attainment and various bonuses. So, I understand how frustrating it is when companies for whom commissioned salespeople work for fail to pay commissions as promised. Successful salespeople work as hard as any professionals I know and they deserve to be paid for all of the sales that they make. The following are the top scenarios that I have seen in Georgia when companies refuse to pay salespeople the full amount of money owed and litigation is imminent.

1. By far, the most common dispute arises when a salesperson quits and leaves the company. Depending on the type of sale, there could be a stream of commissions due for up to a year or longer after departure. Other times, it could be a large payment which triggers commissions due to the salesperson in the future, but after the salesperson has left the company. Many employers take this opportunity to unlawfully withhold commission payments on commissions that were earned and but paid. Absent contractual language to the contrary, this is unlawful. Many times the contract specifically addresses this situation. Other times, it is silent or ambiguous as to who these payments are to be earned and paid.
2. Another common situation which results in a commissions dispute is when a company fires a salesperson and refuses to pay the outstanding commissions unless the employee signs a release and settlement document which hampers her ability to go to work for a competitor. Not only is this not necessary, it puts the salesperson in an untenable position with her formers employee and any prospective employees. If you find yourself in this position, it would make a lot of sense to consult with an experienced commissions lawyer before signing anything that could hurt your legal rights to collect your commissions in the future.
3. Finally, it is common to see a commission dispute when the company pays the wrong person for the sale. Unfortunately for the company, if they paid the wrong person, this does not absolve them from the legal (contractual) obligation to pay the correct salesperson all of the commissions due and owing.
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The following is a reproduction of an actual pleading filed in a business dispute lawsuit to enjoin the other party from continuing its unlawful acts.

IN THE SUPERIOR COURT OF FULTON COUNTY STATE OF GEORGIA
Plaintiff Corporation, Inc., )
Plaintiff,

v.
Defendant

COMPLAINT FOR INJUNCTION AND TEMPORARY RESTRAINING ORDER

Plaintiff files this Complaint and shows the following:

1.

Defendant is a resident of Fulton County, Georgia, and is subject to the jurisdiction of this Court.
2.
Attached hereto as Exhibit 1 is a true and accurate copy of an agreement between Plaintiff and Defendant. Exhibit 1 is incorporated herein for all purposes by this reference. Despite the existence of a valid and enforceable agreement prohibiting Defendant from “soliciting or taking any action to take customers away from XXX ,” Defendant has contacted numerous XXX customers and attempted to persuade them to not do business with XXX . Upon information and belief, Defendant continues this wrongful conduct.
3.
As shown from the facts contained herein, unless defendant is immediately restrained from contacting Plaintiff’s customers, plaintiff will suffer immediate and irreparable injury in that some customers have stated they will use Plaintiff’s competitors instead of Plaintiff after talking to Defendant and other customers will do the same.
4.
Attached hereto is the certificate of plaintiff’s attorney showing efforts to give notice and reasons why notice should not be required.
WHEREFORE, plaintiff prays for the following:
That the Court issue a temporary restraining order prohibiting defendant from communicating with any XXX customers or companies that appeared on any customer lists while Defendant was employed by Plaintiff;
That the Court set down at the earliest possible time a hearing on an interlocutory injunction in this cause;
That upon said hearing in this cause that the Court issue an interlocutory injunction prohibiting defendant from communicating with any XXX customers or companies that appeared on any customer lists while Defendant was employed by Plaintiff;
That upon a final hearing in this cause, that said interlocutory injunction be made permanent;
For such other and further relief that the Court deems just and proper under the circumstances.
This _____ day of _________, 2016.
Respectfully submitted,

__________________

Robert J. Fleming Georgia Bar No. 263475 Attorney for Plaintiff
Katz Wright Fleming Dodson & Mildenhall LLC 2200 Resurgens Plaza 945 East Paces Ferry Road N.E.
Atlanta, Georgia 30326 (404) 923-7497
IN THE SUPERIOR COURT OF FULTON COUNTY STATE OF GEORGIA
Plaintiff Corporation, Inc., )
Plaintiff, )
)
v. ) CIVIL ACTION )
Defendant ) FILE No.

VERIFICATION Personally appeared before me, an officer duly authorized to administer oaths, came __________ who states under oath that she is the authorized corporate representative of the plaintiff named in the above and foregoing Complaint and that the facts contained within said Complaint are true and correct.

_____________________________  Representative

Sworn to and subscribed before me this

____________ day of January, 2016.

_________________________ Notary Public
My Commission Expires:
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Attorney Robert J. Fleming has recently obtained a confidential settlement in a Georgia commissions dispute case. The Firm represented a commissioned salesperson in this dispute which arose when the employee stopped working for the employer. Upon separation, the employer refused to pay full commissions on sales that were made by our client prior to termination, but not yet paid to the employee.

This is a common scenario which we have encountered many times. There are a number of Georgia laws and statutes which require the terminated employee to receive full compensation upon termination. However, the employer frequently takes the position that they will make no more payments upon termination unless the employee signs a “termination agreement” which usually offers a nominal separation payment in exchange for an agreement not to sue or a complete release. From the employee’s perspective, taking this payment is usually not a wise move, even though the temptation is there to take the easy money being offered.
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In April 2009, the Georgia Legislature passed a new law that will allow courts to more easily enforce agreements between employers and employees such as non-competition agreements, non-disclosure agreements, and non-solicitation agreements.

It is currently very difficult to enforce these types of agreements in Georgia, but the proposed new law (which was signed by Governor Sonny Perdue but will not become law unless the voters ratify a constitutional amendment in November 2010 election) would change that drastically.
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Non compete clauses or non-solicitation clauses are governed by O.C.G.A. 13-8-50 to 59. Under Georgia law, restrictive covenants in employment agreements are subject to strict scrutiny and will be enforced only if they are reasonable as to the duration, territorial coverage, and scope of activity of the covenant.

In H&R Block v. Morris, No. 09-11184 (11th Cir. 2010), the Eleventh Circuit addressed a dispute between the well-known tax services company and a former employee who allegedly violated the terms of her employment agreement. The employment agreement contained two restrictive covenants–a non-competition clause and non-solicitation clause. A restrictive covenant in an employment contract, whether a non-solicitation covenant or a non-competition covenant, is considered to be in partial restraint of trade and will be enforced only if it (1) is reasonable, (2) is supported by consideration, (3) is reasonably necessary to protect the restraining party’s interest, and (4) does not unduly prejudice the interests of the public.
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It hasn’t been a great 2010 for Wal-Mart.

Last month, a federal appeals court ruled that a class-action employment discrimination lawsuit against Wal-Mart could proceed. That lawsuit is expected to be the largest such suit in American history, and is expected to include more than 1 million current and former Wal-Mart workers who allege that they suffered gender-based discrimination at the retailer over the past decade. This month, the company agreed to pay up to $86 million in settlement of a lawsuit, which claims that the company failed to pay workers unpaid wages.
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Home Depot has settled a class action lawsuit which alleged that HD violated California’s strict labor laws by not providing its workers with a 30-minute paid meal period after working 5 hours. HD had apparently tried to comply with national labor laws which are chiefly governed by the Fair Labor Standards Act (FLSA).

The settlement shows that many state laws, including many Georgia laws which protect Georgia workers, can form the legal basis for employees to recover for unfair pay practices. While Georgia laws are not as protective of workers as those in California, there are many laws in Georgia which do protect workers and allow for the recovery of back pay, interest, exemplary damages and attorneys’ fees.
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