Managing Partner
Some commissioned salespeople can make a lot of money in New York. Cars, advertising, insurance, and even office equipment are often sold by salespeople who earn a commission on their sales volume.
But careless or even unscrupulous employers can short you on your commissions. Fortunately, U.S. and New York laws provide pay protections for NYC salespeople who earn a commission.
Here is an overview of wage protections for NYC commissioned workers.
Commissions Under New York Law
New York law defines wages to include commissions. Once you earn a commission, New York considers it part of your wages, and your employer must pay it according to New York’s labor laws.
In other words, commissions are not:
- Consideration under an employment contract
- Discretionary
If your employer agrees to pay you a commission, it must pay the commission just like it pays wages.
Agreement to Receive a Commission
You and your employer must have a written agreement to earn a commission. In New York, a commission is:
- Paid to a sales representative
- Compensation by the employer for sales
- Calculated as a “percentage of the dollar amount of wholesale orders or sales.”
New York narrowly defines commissions to include only a percentage of the value of your wholesale sales volume.
Exclusions from Commissions
Commissions do not include:
- Hourly wages
- Annual salaries
- Discretionary bonuses
- Flat sales fees
You do not earn a commission if your employer pays you a flat fee of $3 per sale. Similarly, if the top salesperson at your company each month wins a bonus of $1,000, New York does not consider the $1,000 a commission.
This does not mean that you lack any protections for these forms of payment. But the protection you get will only cover that for wages and not commissions.
Protections for Commissioned Workers in NYC
The protections for commissioned workers cover both employees and independent contractors. Many factors determine whether you qualify as an employee or an independent contractor, including the level of supervision, direction, and control your employer exercises.
New York generally allows employers and employees to determine the terms of their relationship in the commission contract. The contract must define the commission rate. It can define when a commission becomes earned. If the contract does not specify “earned commission,” your commission becomes earned when the goods get:
- Delivered
- Accepted
- Paid for
Employers must pay all earned commissions, even if you quit or were fired in the interim.
Deductions from Commissions
Your employer can deduct from your unearned commissions according to your contract. For example, an employer can deduct travel expenses from your unearned commissions.
Since New York treats earned commissions as wages, your employer can only make deductions from your earned commissions according to New York law. Examples of permitted deductions include:
- Health insurance premiums
- Union dues
- Retirement plans
- Cafeteria plans
The employer must provide you with a statement showing the deductions from your commissions.
Repayment of Commission Advances
New York allows employers to pay advance draws against anticipated commissions. As long as your contract explains how the advances work, the employer can pay advances and require you to repay unearned draws.
For example, you can agree to receive $1,000 every two weeks. If your commissions cover your advances, you receive the excess amount. If your commissions come up short, you must repay the draws.
But if your agreement does not address the repayment of unearned draws, New York law prohibits employers from requiring them from you. In other words, if your contract is silent about repayment of unearned draws, you can keep whatever you receive.
Minimum Wage and Overtime
Employers must pay minimum wage and overtime to commission salespeople. If your commission fails to meet the minimum wage, your employer must make up the difference. Similarly, if you work enough hours to qualify for overtime, your employer must pay it.
Employers do not need to pay minimum wage and overtime for outside salespeople, like door-to-door salespeople. These salespeople work primarily outside the employer’s location.
What to Do When a Violation Occurs
If you believe your employer has violated the protections for NYC commissioned workers, contact business law firm Woods Lonergan in New York City.