Timothy McCabe worked as a sales rep and was paid a salary plus commissions. He resigned after a year-and-a-half, but he didn't collect some $32,000 in commissions owed him for sales he completed before leaving.
His company'ssaid all commissions were "conditional upon ... being an employee at the time of actual payment." McCabe had performed all the work necessary to entitle him to the commissions, but the company didn't pay him because he quit prior to being paid. He sued under Maryland's Wage Payment Collection Law.
A Maryland appeals court found that McCabe should get the commissions because he met all the company's rules for receiving a commission except one, he no longer was employed there. But that didn't matter because that rule was illegal, according to Maryland law. The court relied upon the plain wording of the law, which says, "The employer must pay the employee for wages earned before the termination of his or her employment." Period. (McCabe v. Medex, Maryland Ct. App., 2001)
McCabe's employer tried to point to another decision to prove its point, but the court didn't buy it. In Whiting-Turner Contracting Co. v. Fitzpatrick, a company didn't have to pay a bonus because it was never promised to the worker. But in this case, commission payments had been promised and earned.
Advice: Don't hold back sales commissions (or any wages) as punishment for an employee jumping ship.
Also, know the law on how quickly you have to cough up that final paycheck to departing workers. Each state sets its own rules. Many states say employees should be paid their final wages by the regular payday for the last pay period worked. In addition, some of those laws specify whether commissions must be included in final paychecks.
Free report on terminationrules
You and the Law offers a free, three-page report that explains each state's law on how quickly departing employees must be given their final paycheck. If you'd like it automatically sent to you via e-mail, send a request to YATLreport@nibm.net and be sure to put "Termination pay" in the subject line.
- How to Fire an Employee the Legal Way: 6 Termination Guidelines
- Firing? Follow the 2-and-1 rule: Two company reps, one reason for termination
- Can worker 'plead the Fifth' in an HR investigation?
- Dress, grooming policies should serve bona fide business need
- New Jersey's whistle-Blower law sets tough burden for employers