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What is the problem with discretionary commissions?

On Behalf of | May 5, 2023 | Employment Law - Employer |

Employers who want to find and retain the most talented workers often offer comprehensive benefits packages. Commissions are some of the more common perks in workplaces across the country. According to the U.S. Department of Labor, commissions are sums of money employers pay to workers who achieve certain benchmarks.

With some commissions, like meeting specified sales goals, benchmarks are easy to define. With others, though, satisfactory performance is more subjective. Employment lawyers refer to these types of commissions as discretionary commissions.

What are the problems with commissions?

The problem with discretionary commissions is that they can be difficult to define. Indeed, employers may use language that is arbitrary, subjective or even vague. If that happens, workers might never actually receive commissions, as employers can simply move the goalposts. Also, questions and disputes often arise as to whether a commission is owed after an employee separates from the company, whether by resigning or being terminated. Under Florida law, in the absence of a written policy stating otherwise, a separated employee is entitled to commissions if that employee earned the commission prior to separation, even there was additional work to be completed or the customer had not paid the company prior to the employee leaving.

On the other hand, if the commission had not been completely earned, such as if another employee had to complete the work and particularly if that second employee then received a commission from the company, then the former employee may not be entitled to a commission. Importantly, where the company has a written policy that defines when and under what circumstances a commission is to be paid, including as to whether or not post-termination commissions are due, that policy will be binding regardless of whether or not the employee earned the commission prior to leaving.

Can workers take legal action?

Most commission offerings stem from some type of employment contract, whether the contract is verbal or in writing, or from a commission policy. If employers refuse to pay commissions, adversely affected workers might have grounds to pursue breach of contract claims. In certain circumstances, they can bring a claim for wage theft, which includes the possibility of greater damages.

Many frustrated employees who do not receive rightfully owed commissions often opt to give up. But they shouldn’t. Workers should always pursue their options with the help of an attorney. And frustrated employers facing claims can avoid disputes by seeking the advice and counsel of an experienced employment attorney and putting in place contracts or policies so as to make it clear whether or not commissions are owed.