New Hampshire’s Wage and Hour Statute RSA 275 applies to employees. Only employees are able to go to the New Hampshire Department of Labor to seek unpaid sales commissions as wages. Employees may get up to twice the amount of commissions owed, a hearing much quicker than in court, and reimbursement of attorneys’ fees. Independent contractors who are salespersons are not entitle to seek the procedures and remedies of RSA 275 yet the New Hampshire Department of Labor does seriously review whether the salesperson is legally an independent contractor rather than an employee. Merely calling a worker an independent contractor only begins the analysis that in large part focuses in on the control over the worker by the company. RSA 275 lists several factors to consider in that analysis and companies should carefully consider those factors with their employment counsel to assess the risk of whether a worker they call an independent contractor is later determined by certain state or federal agencies to be an employee subject to unemployment benefits, worker compensation, the wage remedies under RSA 275, and required tax withholdings.
Individual sales persons owed commissions who are treated as independent contractors may be afforded protection under another statute RSA 339-E that provides that companies with an individual sales representative must have: a written contract that establishes the form of the payment and the method in which it is computed and paid; a reasonable length of notice to the party to provide for the termination of the contracts; and the number of calendar days up to 45 days after termination when all commissions are due. If commissions are not paid to that individual salesperson, the employer could be liable in a civil action for damages plus reasonable attorney’s fees and costs and the court may award exemplary damages of up to three times the commission owed. RSA 339-E only applies to individual independent contractors that are due sales commissions for work performed within this State. In other words, if the sales representative has formed a limited liability company or a corporation and has entered into the agreement as such, RSA 339-E does not afford her protections. The limited liability company or corporation has a contract action for the unpaid sales commissions, with no right to damages up to trebling the commissions owed and perhaps no right to reimbursement of attorneys’ fees unless that right is within the contract. However, if the salesperson is an individual owed commissions for work performed within the State and the sales commission owed is large enough to justify going to court to sue under the statute, the potential for up three times the sales commissions owed may be a reason why the worker just agrees she is an independent contractor rather than an employee.
Companies who have sales representatives who are being treated as independent contractors may also consider what is often called a “corp to corp” relationship where they require the independent contractor to either create a corporation or an LLC as a separate legal entity for which the company does business. Not only would this take any commissions disputes outside of RSA 339-E, it decreases the likelihood that the Department of Labor may later find that the relationship between the company and the sales representative is truly an employer/employee relationship when the contractual relationship of the company is with a legal entity rather than an individual.
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].