Commissions & Bonuses
Sales commissions and performance-based bonuses form an important component of the annual compensation received by many highly-paid Texas employees, including those in the real estate, financial services, brokerage, private equities, pharmaceutical, and other sales-related industries.
In the context of commission or bonus agreement modifications, an employee's conduct--including the decision to continue the employment relationship after unequivocal notice that the employer is implementing the the modification--may result in the employee's complete forfeiture of rights under the former plan or agreement.
The more common dispute arises when an employee is terminated or resigns before payment is made. Whether an employee may recover sales commissions after termination is based, in part, on a numerb of factors, including:
- Whether the commission plan is written or oral;
- The clarity of the commission plan’s terms;
- The plan’s definition of when a commission is earned or accrues;
- The amount of duties remaining, if any, needed to be performed to complete the sale at the time of the employee’s departure;
- The employer’s custom or practice of paying other departed employees; and
- Whether or not the employer discharged the employee with good cause.
While an employee's entitlement to unpaid commissions and bonuses requires a case-by-case legal analysis, certain general rules may be applicable:
- Employees who voluntarily resign before performing substantial duties generally may not be entitled to recover commissions after departure;
- Employees who have been involuntarily terminated may be entitled to recover either a pro rata share of the commission or, in some cases, the full commission depending on the commission plan’s terms; and
- Vague and ambiguous commission plan terms generally are construed against the employer in situations where the employer drafted the plan.
An employee who is denied commissions or bonuses may be able to proceed with a breach of contract claim and, under appropriate circumstances, fraud. Under
What to Do to Recover Unpaid Commissions and Bonuses
- Get your commission/bonus agreement in writing!
- If you can't get it in writing, e-mail the company confirming the relevant commission/bonus terms of the parties' understanding. Be sure to ask the company's representative to reply immediately if your written description of the parties' agreement is not correct.
- Keep a copy of your written commission/bonus agreement at home.
- Seek legal advice from a Dallas employment lawyer as soon as possible after you're terminated. Your options may be limited if you fail to act promptly.