Commissions & Bonuses
Dallas Employment Lawyer
Sales commissions and performance-based bonuses form an important component of the annual compensation received by many Texas employees, including those in the real estate, financial services, brokerage, private equities, pharmaceutical, and other sales-related industries.
The Basics of Texas Law on Commissions
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 change--may result in the employee's forfeiture of rights under the former plan or agreement.
The more common dispute arises when an employee is terminated or resigns before a commission or bonus payment is due or paid. Whether an employee may recover commissions and bonuses after termination is based on a number of factors, including:
- Whether the commission plan is oral or in writing;
- The clarity of the commission plan’s terms;
- The plan’s definition of when a commission is earned or accrues;
- The duties, 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 commissions and bonuses to departed employees; and
- Whether the employer involuntarily discharged the employee with good cause or the employee voluntarily resigned.
Three Things to Remember
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 may be 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
How 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 confirm whether you will be paid commission/bonus monies in the event of termination. Kindly ask the company's representative to reply immediately if your written description of the parties' agreement is not accurate.
- 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.