Highly paid salespersons on Wall Street typically are paid a substantial percentage of their yearly compensation in commissions. A commission is compensation based on a percentage of the dollar amount of the salesperson’s orders or sales. If you would like more information, contact our New York City Unpaid Commissions Lawyer for help.
Under state and federal law, the failure of your company in New York to pay, to its salespersons, their earned commissions exposes your company to significant monetary liability.
Specifically, an employer in New York which fails to pay, to its salespersons, their earned commissions may be held liable to the salespersons in the amount of their unpaid or underpaid commissions, plus liquidated damages equal to 100 percent of the amount of the unpaid or underpaid commissions, reasonable attorneys’ fees, costs of the action, and interest.
Whether your business’s salespersons sell securities, goods, services, real estate, insurance, or anything else, their earned commissions are protected like traditional wages.
If your company in New York pays commissions to its employees, the state and federal laws by which your company must abide include the following.
New York State Law
In New York, a commissioned salesperson’s agreed terms of employment must be in writing and signed by both the employer and the commissioned salesperson. This employment agreement must include:
- A description of how wages, salary, drawing accounts, commissions and all other monies earned and payable will be computed
- How often the employee will be paid
- The frequency of reconciliation (if the agreement provides for a recoverable draw)
- Details relevant to payment of wages, salary, drawing account, commissions, and all other monies earned and payable when the employment relationship ends
As a penalty, the New York Labor Law creates a presumption that, if the terms of employment are not in writing, the terms that the commissioned salesperson presents are the agreed-upon terms of employment.
New York law also sets forth requirements for the payment of sales commissions to independent contractors. It is the position of the New York State Department of Labor that all contracts between independent contractor sales representatives and principals must be in writing. Further, when a contract between an independent contractor sales representative and a principal is terminated, all earned commissions must be paid within five business days after termination (or, in the case of earned commissions not due and owing when the contract is terminated, within five business days after the commissions become due).
The federal Fair Labor Standards Act, 29 U.S.C. §§ 201-219 (the “FLSA”), and its implementing regulations, 29 C.F.R. §§ 510 et seq., do not require employers to pay, to their workers, commissions.
Rather, the FLSA and it implementing regulations require that most employees in the U.S. be paid at least the federal minimum wage of $7.25 per hour for all hours worked and overtime pay at 1½ times the regular rate of pay for all hours worked in excess of 40 hours in a workweek.
That said, the FLSA sets forth an exemption from overtime pay for certain employees of certain retail and service establishments, who are paid on a commission basis in whole or in part.
For purposes of the commissioned employee exemption from overtime pay, a retail or service establishment means an establishment 75% or more of whose annual dollar volume of sales of goods or services (or of both) is not for resale and is recognized as retail sales or services in the particular industry.
If a retail or service employer elects to use the FLSA”s commissioned employee exemption from overtime pay, three conditions must be met:
- The employee must be employed by a retail or service establishment;
- The employee’s regular rate of pay must exceed 1½ times the applicable minimum wage for every hour worked in a workweek in which overtime hours are worked; and
- More than half the employee’s total compensation for a representative period (not less than one month) must consist of commissions onCCgoods or services.
If, and only if, all three of these conditions are met, the exemption is applicable, and the retail or service employer need not pay, to the commissioned employee, overtime pay at 1½ times the regular rate of pay for all hours worked in excess of 40 hours in a workweek.
Call the Law Offices of David S. Rich, LLC
Call the Law Offices of David S. Rich, LLC at (212) 209-3972 to speak with a knowledgeable labor and employment lawyer about ensuring that your company complies with commissions laws and other wage and hour laws, or to retain a skilled unpaid commissions attorney to defend your company in unpaid commissions lawsuits or other wage and hour litigation.