Sales commissions form an important component of the annual compensation of many North Carolina employees, including employees in real estate, finance, sales, private equities, pharmaceutical, and other sales-related industries. The payment of unpaid commissions are among the most contentious area of wage and hour litigation.
If an employer promises the payment of commissions, it must comply with its policies until the commission policy is (a) changed in writing and (b) the employee is given notice of such a change. When an employer changes its promised commission policy, the new policy is only effective going forward, but will not apply retroactively. For example, assume your employer had a policy in January to pay 10% commissions on sales and you earned $6,000.00 in commissions during that month. If in February, your employer changed the policy to pay 5% commissions on sales, you are still entitled to the full $6,000.00 in January’s commissions. Going forward, however, you are only entitled to the 5% commissions provided that you received notice of such a change in writing.
Earned commissions must be paid to the employee upon termination or resignation unless there is a “written forfeiture clause.” Even if an employee is terminated “for cause,” earned commissions must be paid to the employee with their final paycheck unless there is a written forfeiture clause that clarifies how such commissions are to be forfeited.
Because commissions are considered “wages” under the NCWHA, you may be awarded liquidated damages – twice the amount of unpaid commissions. In the example above, if your employee only paid $3,000.00 in January, a judge can award you up to $6,000.00 in commissions (double the $3,000 that is owed). A judge can also award you attorneys’ fees at our normal hourly rate. This greatly benefits employees and generally allows us to take unpaid commissions cases on a contingency basis. This means you will not owe anything until your claim is resolved.