Too many employers play games with sales commissions. They delay payment. They use flimsy pretexts to withhold payment. They use accounting tricks to lower the amounts paid. They hold commissions over the heads of their salespersons to keep them in line.
Fortunately, Michigan law affords robust protections to sales professionals. Under the Sales Representative Commission Act (SRCA), an employer that fails to pay a commission when due is liable for damages—and double damages it the failure was intentional. Notably, no showing of bad faith is required. To be liable for double damages, the employer simply must have withheld money owed to the sales representative on purpose. In addition, a sales representative who is forced to sue to recover a commission is entitled to recover the legal fees expended in obtaining a judgment against the employer.
(Note: Though this post focuses on employment relationships, Michigan law regarding sales commissions applies equally to independent contractor and other agreements.)
What If an Agreement Does Not Specify When Commissions Are to Be Paid?
Whether unintentionally or by design, some sales representative commission agreements are not models of clarity. In particular, an agreement may not make it clear when payment of a commission to the sales representative is actually due. The SCRA addresses this common situation. Under the statute, past practices between the parties shall control, and if there are no past practices, then courts must look to industry custom to determine when payment is due.
Many businesses require top executives and sales professionals to sign non-compete agreements. These individuals typically have access to vital trade secrets or customer relationships that could be used to damage the business if the person leaves to work for a competitor or set up a competing venture.
Increasingly, however, non-competes are used with low-level employees such as fast food workers, customer service representatives, and hair stylists. This practice has met with a flurry of criticism. (For some recent examples, see here, here, and here.) One prominent critic contends that non-competes enable employers to “use the threat of litigation to constrict wages and employee mobility,” and that “[w]orkers bound by noncompetes cannot rely on outside offers and free-market competition to fairly value their talents.”
An opinion from the Michigan Court of Appeals sheds light on the subject. The case, BHB Investment Holdings, LLC v. Ogg (Feb. 21, 2017, unpublished), involved franchises of two competing swim instruction chains, Goldfish Swim School and Aqua Tots. Goldfish Swim School of Farmington Hills (“Goldfish”) sued a part-time instructor who was terminated and went to work for Aqua Tots Canton (“Aqua Tots”) in alleged violation of his non-compete and non-solicit agreements. Goldfish also brought claims against Aqua Tots. The instructor earned $12.50 per hour at Goldfish and $11 at Aqua Tots.
Law and the Creative Economy is the blog of lawyer Maxwell Goss. This blog is for informational purposes only.