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Paid Sales Commissions In New Hampshire

On Behalf of | Feb 15, 2018 | Employment Law

Sales commissions to employees are considered wages under New Hampshire’s wage statute, RSA 275 which allows for an employee who has not been paid wages to file a claim up to three years from when they are owed their commission; either through the New Hampshire Department of Labor or the state Superior Court. If the employee files with the New Hampshire Department of Labor and is successful, he can file an action in the Superior Court to enforce the claim if the employer does not pay his wages.  New Hampshire’s wage statute also has the possibility of doubling the wages due if the hearing officer at the Department of Labor finds that the employer willingly did not pay. Some officers of the employer could also be personally liable for the wages owed the employee.

If the claimant is successful, irrespective of the employer’s intentions in paying the commission, he is entitled to obtain from the Superior Court his reasonable attorney’s fees both during the Department of Labor proceedings and at the Superior Court.  In other words, if the employee making the commission claim believes the employer may dispute the claim and the amount is sufficient to make it worth hiring an attorney during the New Hampshire Department of Labor, the claimant can later seek from the employer reimbursement of the attorney’s fees he expended for the attorney’s services both at the Department of Labor and at the Superior Court.  That attorney fee reimbursement is obviously an important remedy for the employee in that it is sometimes difficult for the employee in a complex commission case to go unrepresented before the New Hampshire Department of Labor and certainly difficult to go unrepresented in the Superior Court.

New Hampshire regulations also require that the employer clearly set forth in writing to the employee the details of compensation and that equally applies to any commission formula.  The general rule of employment sales commissions is that they are due the employee when the order is accepted by the employer.  While it is probable that the employer may not pay the commission until a later date particularly since the order could be cancelled or not paid for, that does not mean that the commission is not earned; it is earned subject to the contingency of it not being cancelled and the customer paying. The commission may not be paid until later but can still be earned when the sale is accepted by the employer. That distinction is important when the salesperson quits or is fired while having sales in the pipeline. Commission disputes arise for sales that were been made by the employee and accepted by the employer prior to that salesperson leaving the company especially if the order is not shipped until after the employee has left the company.  Under New Hampshire law, unless there is a written agreement between the employer and employee or the conduct of the parties clearly demonstrated a different compensation scheme, the commission would be due even though the product was not shipped to and the customer did not pay for it until after the employee left the company.  Having said that, the employee who is entitled to the commission may still only receive the commission after the customer pays the employer which could be months after he has left the company.

Employers may confuse the distinction as to whether or not the commission is owed compared to when it is due.  By way of example:  If the employer has a commission plan that states the salesperson is to get a 10% commission on all sales and that salesperson makes a $500,000 order from a customer and thereafter leaves the company, the employer may very well argue at the Department of Labor that at all times during the employment of the salesperson was never paid a commission until the customer paid.  However, if the customer put in the $500,000 order and it was shipped and paid for two months after the salesperson left, the commission of $50,000 (10% of $500,000) could be due two months after the employee left the company. The New Hampshire Supreme Court has made it clear that an employee commission plan should also clearly explain any employer’s discretion as to whether or not to pay the commission.  However, if an employee has no real promise to potential compensation by the employer, he may be less likely to meet a revenue goal than an employee who has a clearly defined compensation plan that states that “if you do this, you will get that.”

Lastly, if an employee has a commission claim at the New Hampshire Department of Labor, it is prudent to develop a strategy with an attorney prior to filing a claim.  The New Hampshire Department of Labor’s experienced hearing officers are well versed in wage laws and the hearing could be held within a couple of months whereas in the Superior Court litigation could be a year or more.   With that said, while a case takes more time if filed in the Superior Court, it may be easier for the employee to obtain the detailed discovery that is needed where a commission is based upon the company achieving certain financial results such as commissions based upon net profits.

For employers developing a commission plan, they should be aware that if there is any ambiguity in the plan it is likely to be construed against the employer in favor of the employee.  Therefore, it is extremely important for the employer to be as clear as possible as to a commission plan including what happens to sales in the pipeline when the salesperson leaves the employer.

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].