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Protect Your Sales Commissions!

by | Mar 31, 2021 | Firm News |

Are you in sales?  Do you earn commissions as part (or all) of your wages?  Well, if that’s you, then pay attention to today’s decision by the Court of Appeals for the Fourth Circuit.  That’s the appellate court with jurisdiction over Maryland, Virginia, West Virginia, and the Carolinas.

The court upheld the dismissal of a very large commissions claim (over $500,000.00), because the employer HAD DISCRETION to change the terms of a contract that involved commissions.  This is a BIG DEAL for outside sales representatives.

Make sure that your contract does not give the employer “unfettered discretion” to change the way your commissions are paid.  If you do, then courts are likely to find that the employer never made you an enforceable promise to pay a commission.

“[The commission plan] repeatedly and unreservedly stated that IBM could adjust the amount of any commission at its sole discretion. Because IBM never promised Martignetti that he would be paid a particular commission rate, unpaid amounts under the Plan’s formula cannot be considered “wages” under the MWPCL.”  Martignetti v. International Business Machines Corp., No. 19-2228 (ECF 41) (4th Cir. Mar. 31, 2021)

It’s tough out there, folks, so read your contract and make sure of what it says.  I’m always available to review employment contracts and to negotiate with the biggest companies on your behalf.