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.
This legal blog is written by attorney Maxwell Goss. Max practices business litigation, with a focus on non-competes, trade secrets, shareholder dispute, and intellectual property.