A salesperson may know that a customer was generated, an order was obtained, or a deal was eventually closed. However, proving that a commission is legally owed can require more than showing that the salesperson contributed to the transaction. The compensation agreement, the timing of the sale, the payment terms, and applicable Michigan law all play a role in determining when a commission payment is owed. Our sales commission attorneys at August Law assess commission disputes and advise clients on how to pursue the payments they are owed.
Start With the Commission Agreement
Start with the compensation agreement with your employer. A written commission plan may specify the event that triggers commission to become due.
For example, an agreement could provide that a commission is earned upon acceptance of an order. Another may require the customer to pay before the commission becomes payable. Some agreements also address cancellations, returns, chargebacks, renewals, or sales completed after termination.
Those provisions can make a substantial difference.
Michigan’s Sales Representatives’ Commission Act (MCL 600.2961) provides that the terms of the contract determine when a commission becomes due. If the contract does not establish that timing, the parties’ past practices control. If there are no applicable past practices, the custom and usage prevalent in Michigan applies.
Does Michigan’s Sales Representatives’ Commission Act Apply?
This is an important question. Under Michigan law, a commission is compensated to a sales representative based on a percentage of orders, sales, or profits. The Act defines a sales representative as a person who contracts with or is employed by a principal to solicit orders or sell tangible goods and who receives at least part of the compensation through commissions.
The statute also defines “principal” and addresses product sales in Michigan. As a result, a salesperson should not assume that every commission dispute falls under the Act.
If the statute applies, it provides specific protections concerning the timing of commission payments and potential remedies for intentional nonpayment.
What Evidence Can Help Prove a Commission Claim?
Evidence should establish both the underlying sale and the contractual event that made the commission payable. Important evidence may include:
- The signed employment or sales representative agreement
- Commission plans
- Written amendments
- Emails explaining commission calculations
- Customer orders
- Purchase agreements
- Invoices
- Customer payment records
- Sales reports
- Commission statements
- Payroll records
- CRM records
- Records showing the date of termination
- Communications concerning disputed commissions
Internal company records can be particularly important where the salesperson does not have access to the company’s accounting system.
What Remedies May Be Available?
When MCL 600.2961 applies, a principal that fails to pay commissions as required can be liable for actual damages. If the principal intentionally failed to pay the commission when due, the statute provides for additional damages equal to twice the unpaid commissions or $100,000, whichever is less.
The statute also provides for reasonable attorney fees and costs for the prevailing party. Other contractual or legal claims may also be relevant depending on the circumstances.
Preserve the Records Before a Dispute Escalates
Commission disputes often involve records spread across email accounts, CRM systems, accounting software, customer files, and compensation statements. Preserving those records can make it easier to reconstruct what happened and determine whether you actually earned the payment.
If your former employer has withheld commissions that you believe are owed, or if your business is facing a commission demand, contact August Law to discuss the evidence in your case.