Commission Dispute Between Agent and Salesperson #34
CATEGORY: Legally Speaking
TAGS: Breach of Contract Commission Damages Employee
By Gerry Neely
A salesperson's right to payment of a commission or of a bonus earned during his employment, but not paid before the salesperson left the agent with whom he was employed, has been examined in several cases. In the first case, after an amicable parting, the agent considered that some of the subsequent actions of the former employees were not entirely "cricket" and he denied payment of bonuses and commissions owed to the former employees. They sued and the agent based his defense on the interpretation of the written commission plan in effect in the office. The plan contained the following sentence:
"All commissions earned are the property of the agency, and in the event of any dispute, it shall be at the discretion of the agency, how the commission shall be apportioned."
The defendant's argument that the discretion given to it allowed it to refuse to pay a salesperson any or all of his commission was rejected by the Court, which held that that sentence only entitled the agent to settle disputes between two salespersons in the same office claiming entitlement to the commission, or where the dispute arose between the agency and the vendor. The agent's right to withhold the commission could only arise it proof of damages, set off or counterclaim had been presented by the agent. Judgment was given for the plaintiffs.1
In two separate cases brought against the same employer by two former employees, the principal issue was the question of the rate of commission to be paid following termination of employment with respect to deals written prior to the salesperson leaving, but completing after the salesperson had left. The employer's policy manual provided for payment of a basic commission of 50%, with 60% to be paid to salespersons who met the qualifications described in the policy manual. The manual further provided that salespersons who had left the company would not be eligible for retroactive bonuses on deals completing subsequent to the date of termination.
In the first case, the salesperson was entitled to receive a 60% commission split prior to his decision to terminate his employment. The Court interpreted the policy manual to mean that the additional 10% he received was a bonus which he was not eligible to receive once he had left his employment.2
In the second case, the former employee was entitled to a 60% commission split, but his employment was terminated by his employer. If the Court had followed the decision in the preceding case, it would have meant that the employer's actions prevented the employee from receiving the additional 10% to which he would otherwise been entitled. The Court held that this would have resulted in the employer being unjustly enriched at the expense of the employee, and it gave the former employee the extra 10%.
The second case also dealt with several other issues, one of which was an award of damages to the former employee for expenses of $404.35 plus general damages of $400.00. These arose because the former employee participated in an incentive program which rewarded the successful participants with a trip to Hawaii which included a "first class hotel" on Oahu and accommodation in one of "Kanai's top hotels". The employee refused to accept the substandard accommodation actually available to him and presented a bill for the hotel cost incurred in finding accommodation of the quality promised. The Court held that the failure to provide the promised accommodation was a breach of contract and the former employee was entitled to be reimbursed for the extra expenses incurred. The additional $400.00 was to compensate for personal inconvenience resulting from the breach of contract.3
A further issue in the second case was whether or not the employer's policy manual created a contract between the agent and the salesperson. The Court of Appeal in February, 1983, held that it did.
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