MIAMI BUSINESS LITIGATION: COMMISSION PAYMENTS

Many employers compensate their employees on a commission basis. Some employees are paid 100% on commission, while other employees receive commissions as part of their total compensation package. However, paying employees on a commission basis, whether in full or in part, can create legal disputes because the revenues generated by the employee’s commission related activities may not be paid to the employer until after the employment relationship ends. This article explores those situations. The Miami business litigation attorneys of the Mavrick Law Firm represent businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

“The general rule is that an employee is entitled to commissions collected post-termination, provided those commissions were ‘earned’ during his employment.” Comerford v. Sunshine Network, 710 So. 2d 197, 198 (Fla. Dist. Ct. App. 1998). In Cornell Computer Corp. v. Damion, an employee and employer entered a contract obligating the employer to pay the employee a salary “in the form of a 10% commission on the gross fee billed and received by [the employer] for each computer technician [the employee] placed with a corporate client.” Cornell Computer Corp. v. Damion, 530 So. 2d 497 (Fla. Dist. Ct. App. 1988). The contract was silent on the issue of whether commissions were due post-termination. The employer generated revenues based on the employee’s computer technician placement after the employment relationship ended and the employee sued to recover his 10% commission. The court ruled the employee was entitled to the post-termination commissions because “the services necessary to earn the commissions were performed prior to termination of the employment.” However, application of this law is limited by the satisfaction of any conditions imposed under the applicable contract. If those conditions are not met, the employer will not be obligated to pay the employee’s commissions. Brough v. Imperial Sterling Ltd., 297 F.3d 1172 (11th Cir. 2002) (distinguishing authorities like Cornell Computer Corp. becausetheyinvolve claims for the payment of commissions when all conditions required to earn those commissions were completed prior to terminating the relationship).

One can even argue an employee does not have to wait for an employer’s customer to pay the employer before the employer is obligated to pay the employee’s commission. Comerford, 710 So. 2d 197 (“Moreover, if a contract is silent not only on post-termination rights, but on the right of accrual, then commissions are generally deemed “earned” when a sale is made, although the goods or services are delivered after his termination.”). In Abbott v. Tec-Mill & Supply, Inc., the court determined the employer had to pay the employee’s commission at the time the employment relationship terminated even though the employer’s customer had not yet paid the employer for the work. Abbott v. Tec-Mill & Supply, Inc., 178 So. 2d 881 (Fla. Dist. Ct. App. 1965) (“[I]n the absence or a contrary provision in the plaintiff’s employment contract he was entitled to receive earned commissions when his employment was terminated, notwithstanding such termination of employment came before completion of the contracts solicited.”).

The foregoing demonstrates the need for a clear unambiguous contract concerning the payment of commissions. The contract should expressly state whether the employer will pay the employee commissions after the employment relationship terminates and whether the employer must pay commission even though it did not yet receive the revenue giving rise to the commissions.

The Miami business litigation lawyers of the Mavrick Law Firm also represent clients in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.