Unpaid Commissions
Many employees and contractors in real estate, multi-family, sales, recruiting, medical devices, and other fields work on commission, meaning they receive a portion of the sales they procure. They’re understandably frustrated, then, when their clients or employers fail to pay them these commissions.
In cases such as these, an employment rights attorney may be able to help workers pursue the compensation they are rightfully owed.
What are unpaid commissions?
People who work in sales, retail, real estate, software, and other industries often receive a commission – a portion of the sale or profit – when they successfully procure a sale or rental. Unfortunately, some employers refuse to pay some or all of these commissions owed. This can lead to disputes and even lawsuits, with workers taking legal action to secure the commissions they deserve.
Can I sue my employer if I didn't receive a commission?
Potentially, yes. If your contract (written agreement, email correspondence, oral deal, or handshake deal) guarantees a commission for achieving a certain outcome (such as making a sale or securing a rental), and you hit that goal but don’t receive your commission, that would likely qualify as a breach of contract. In scenarios like these, you may be able to pursue compensation through a lawsuit.
The best way to determine if an unpaid commission rises to the level of illegality such that you can collect both the incentive or variable compensation you are owed, and your costs and fees for pursuing your claim, is to speak with an employment attorney.
What kind of compensation can I expect from an unpaid commission lawsuit?
The money you can recover through an unpaid commission lawsuit will depend on the unique factors of your case – for example, how much in commissions you’re owed, whether the compensation is guaranteed or discretionary, whether you must be currently employed to collect, or whether you are entitled to a pro rata share of commissions after you were terminated – as well as the laws your employer violated. In most cases, these are the types of damages a plaintiff can recover:
- Economic damages: These include back pay covering all the commissions you should have received, or a pro rata share of commissions based on the work you already performed;
- Consequential damages: Damages that naturally flow from the breach of the agreement;
- Interest: Pre- and post-suit interest; and
- Attorney’s fees and court costs: The reasonable amount incurred in bringing a lawsuit.
An employment and civil rights lawyer can help you determine the potential value of your case, as well as the likelihood of a successful resolution. Contact us for a free consultation to learn more.
Can I get fired for filing an unpaid commission lawsuit?
It depends. There is a dangerous loophole on this point in Texas law. We strongly suggest current employees with unpaid or underpaid commissions consult with a qualified Texas employment attorney as soon as you think you may need assistance recouping an unpaid commission. Though many states have protection for filing an unpaid commission claim, the Texas Workforce Commission (TWC) unfortunately does not. That said, an attorney can assist in ensuring your critical next steps are as protected as possible.
Though many employees are understandably nervous about filing a lawsuit against their employer or client, many other state and federal laws protect employees from retaliatory firings or demotions provided they fall within certain statutory protections. Attorneys can help secure your protection against retaliation for seeking the pay you are owed in Texas.
What happens to my commission after I leave my job?
Unless your contract stipulates that you won’t receive any commissions after quitting or being fired, you should receive them. In June 2022, the Texas Supreme Court upheld this rule. As long as the employee is the one who procured the sale (caused it to occur), and there is nothing in their contract prohibiting post-employment commissions, they’re entitled to their commission(s) even after their tenure with the organization has ended.
As for when this commission must be paid, that depends on both the language in the contract and the circumstances of the worker’s departure. Unless their work agreement states otherwise, if they were laid off or involuntarily terminated, they should receive their commission within six calendar days. If they resigned or quit, they should get their commission by the next scheduled payday (likely within 2-4 weeks) after their resignation.
According to the TWC, those are the deadlines “unless a different payout schedule is provided in the wage agreement or policy relating to that particular component of the pay. In that case, the payment schedule outlined in the agreement or policy will determine the deadline for payment.”
If I make commissions on sales, am I still owed overtime pay?
Under both the Fair Labor Standards Act (FLSA) and the policies of the Texas Workforce Commission (TWC), full-time, non-exempt employees who receive commissions are also entitled to overtime pay as required by state laws. Additionally, the overtime rates must include your commissions. This means your overtime rate in most circumstances must be more than time and a half your regular rate of base pay if you earn commissions.
Conversely, someone working as an outside salesperson or contractor – whose contract stipulates that they only receive commissions, not an hourly or annual salary – would likely not be owed overtime pay.
Are employees who make commissions entitled to minimum wage?
As with overtime pay, full-time, non-exempt employees should be paid their state’s minimum wage – regardless of whether or not they receive commissions on sales. The TWC states, “Employees paid on a commission basis, or who are paid a commission in addition to an hourly rate or salary, are covered by the minimum wage and overtime rules just as any other non-exempt employee.”
Generally speaking, minimum wage laws apply to all full-time employees, but not contractors, freelancers, or part-time workers.
Does Kaplan Law Firm handle unpaid commission lawsuits?
Yes. Kaplan Law Firm is an employment law and civil rights firm that’s been proudly serving Texans since 2015. Founded by Austin Kaplan in Austin, Texas, our firm has represented hundreds of clients in a wide range of employment and civil rights matters, including claims for unpaid commissions, breach of contract, discrimination, wage and hour violations, and whistleblower retaliation.
We’ve recovered millions of dollars for our clients; received dozens of five-star reviews on Google and Avvo; and our attorneys have been featured in The New York Times, The Washington Post, Bloomberg, Fast Company, and on CNN.
Reach out today for a free, confidential case review to see if we can help you recover the compensation you deserve.
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