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Paying commission? Get written agreement

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in HR Management,Human Resources,Leaders & Managers,Management Training

If your organization pays some employees on a commission basis, it may be a good idea to put it in writing. Relying on just an oral agreement may lead to trouble down the road—especially if the employee quits and says you owe him money. Without a written agreement spelling out the commission terms, a lawsuit probably will come down to his word against yours.

Recent case: Central Leasing Management’s business consisted of taking over and running client companies’ HR functions. Central would “lease” the employees back to the companies it contracted with and take care of all the payroll details.

Tom Stallings was hired as a salesman, and Central orally agreed to pay him a 1.5% commission on the total payroll for each company he signed on as an employee-leasing client. When Central stopped paying commissions on one client’s payroll, Stallings sued to collect under the terms of the oral agreement. He testified Central owed him six months’ commission for his work with that client; Central offered no testimony about that particular account. Absent testimony or a clearly written agreement saying otherwise, the court took Stallings’ word for the amount owed. (Stellar Insurance and Stallings v. Central Companies, et al., No. 2:06-CV-11, WD NC, 2007)

Final note: Always have an attorney review contract language, which could inadvertently turn an at-will employee into a contract employee you can’t fire at will. An attorney can make sure the employee remains an at-will employee, while the compensation details are still being worked out.

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