What happens to commissions due a
salesperson if they are terminated or quit? That was the question that Mark
Dietrich and his former employer Bell, Inc. have been fighting over in Michigan
Federal Courts since he was terminated in May of 2011. In the case the court ruled
the contract entitled Mr. Dietrich to commissions on accounts he procured for
two years from each customer's contract start date. The case of Dietrich
v. Bell identifies many of the issues involved in sales compensation
agreements and gives yet one more reason why you should have these agreements
reviewed by an attorney.
Here's a summary of my employer
tips gleaned from the case:
1.Know what laws apply to sales compensation
agreements in your state. For example, in this case Michigan's
Sales Representative Commission Act was at issue. Your BNA state law summary
can help.
2.There is a difference between lead generation, customer
procurement and a sale. If the salesperson generates a lead are they entitled
to all the sales anyone makes from them? Or are they only entitled to a
commission on direct sales they have made?
3.
What does it mean to make a sale? Did they do
all they needed to do on their part? Is the commission conditioned on actual
payment? What about returns or other offsets?
4.
How long are they entitled to commissions? For
all subsequent sales or renewals?
5.
How involved are they after the sale? If there
is an ongoing service obligation that matters in terms of post-termination
compensation.
6.
Make sure you have all the above in a signed
agreement. As mentioned by the court "the contract says nothing regarding
termination; it provides no express answer to how the parties intended to
terminate their relationship."
Note this was a difficult
decision for the court as one of them dissented, agreeing with the underlying
decision of the District Court that no wages were due.