If a sales rep individually contracts with one or more companies that manufacture, produce, import, or distribute a product for sale to customers in New Hampshire and if that sales rep is paid a commission, in whole or in part, for those sales, he may have certain protections under a New Hampshire statute, RSA 339-E, regarding receiving commissions after the termination of his service with the company. In particular, the company is required to enter into a written contract with the sales rep to establish the form of payment and method by which the payment is to be computed and paid to the sales rep and the reasonable length of notice which either party must provide the other for termination of the contract. The contract must also establish the number of calendar days, up to a maximum of 45 days after the date of termination or notification of death, when the sales commission shall be paid to either to the sales rep or his estate and any other terms and conditions to which the parties agreed and are included in the contract.
If the company does not pay the commission on the sales by the independent sales rep at the termination of the business relationship, the company is liable for any unpaid commissions plus reasonable attorney’s fees and costs to the sales rep. The court may also award to the sales rep a penalty up to three times the commission owed. For the sales rep to be afforded these protections, he cannot be operating as a separate legal entity such as a corporation or limited liability company. If a company attempts to waive the rights under RSA 339-E, such waiver is ineffective and void.
Whether a company’s sales reps are independent or employees, the company should speak with legal counsel regarding the possible requirement of complying with RSA 339-E. or New Hampshire ‘s wage and hour laws. An employer’s failure to pay sales commissions due its employees may lead to not only an award of the commissions owed and reasonable attorney’s fees and costs against the employer but also an award of liquidated damages, often doubling the actual commission owed.
If a sales rep is not paid her commission, she should also speak with legal counsel about collecting her commissions, whether she is an independent sales rep or a former employee of the company. She should further discuss the amount of commission due since in some circumstances commissions are calculated on the orders booked and accepted by the company even if those orders are not shipped and paid for by the time of the termination of the relationship.
J. Daniel Marr is a Director and Shareholder at Hamblett & Kerrigan, P.A. His legal practice includes counseling businesses and individuals on a variety of legal issues and advocating on their behalf. Attorney Marr is licensed and practices in both New Hampshire and Massachusetts. Attorney Marr can be reached at [email protected].