Run sales commission language by counsel to avoid needless litigation — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

Run sales commission language by counsel to avoid needless litigation

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Employees who work on a commission basis and are fired often look to their compensation agreements to find any possible way they can claim additional commissions. Their first stop after the unemployment office is often an attorney, who will go over the compensation agreement with a fine-toothed comb to see whether there is more money to be had.

That’s the best reason to make sure any commission agreement leaves no room for doubt. Make sure it says exactly what you mean it to say. After all, who needs months or years of litigation—plus lost time and costs associated with fighting over the language—when a clear agreement will prevent trouble? The best option is to have an experienced attorney draft the agreement.

Recent case: Scott Eungard was fired from his commissioned sales job after about a year in which he made no sales. In the hours leading up to his discharge, Eungard’s boss accompanied him to his only current sales prospect and tried to show him how to make a sale. The boss proceeded to toss the contract across the table and told the customer to sign.

Thirty-six hours later, Eungard was fired. Meanwhile, the customer had signed the contract and sent in a check. Eungard then sued, alleging that he was due the commission.

The company paid him half, but argued he had not earned the second half by the time he was terminated. The written agreement said the company paid commissions for any “closed orders” as of the termination date. But it also said 50% was due on signing and the rest a month later. Eungard argued he was due all the commission.

The company countered that the contract was not final—it had yet to sign the contract at the time Eungard got the boot—and therefore nothing was due.

The court said the language was unclear. It ordered a jury to sort it all out using Michigan contract law. (Eungard v. Open Solutions, No. 06-2380, 6th Cir., 2008)

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