The Mistake of a Business Owner Regarding Commission Based Compensation

In Minnesota, an employer must promptly pay a salesperson commission earned through the last day of work. Commissions earned through the last day of work “means commissions due to services or merchandise which have actually been delivered to or accepted by the customer by the final day of the salesperson’s employment.”

A mistake that business owners make is not promptly paying commissioned salespersons after the employment has ended. Another mistake is not understanding that independent contractors are generally also covered under this law.

Prompt payment depends on the circumstances of the commission salesperson’s end of working with your business. If the salesperson is terminated, then upon demand of payment, the salesperson must be paid commissions earned through the last day of work no later than three working days after the salesperson’s last day of work. Similarly, if the salesperson quits with at least five day’s written notice then the salesperson has to be paid in the same manner as if the salesperson was terminated. However, if the salesperson quits without giving at least five day’s written notice, then upon demand of payment, the salesperson must be paid commissions earned through the last day of work no later than six working days after the salesperson’s last day of work.

However, if the salesperson, during employment, collected, disbursed or handled money or property, then you have ten working days after the employment ends to audit and adjust the salesperson’s accounts before the salesperson can demand commissions earned.

Paying commissions earned pursuant to the statute must be taken seriously. Not only does Minnesota have the strictest wage theft laws in the nation that were passed with bi-partisan support, the statute mandates that an employer who fails to pay within the applicable period is liable, in addition to the earned commission, for a penalty for each day that is an amount equal to 1/15 of the salesperson’s commissioned earned, but still unpaid, through the last day of employment. The penalty period is capped at 15 days.

Hypothetical: Gary has commissions owed to him in the amount of $48,000.00. His employer fires him. Gary demands payment, and the employer ignores it.

Analysis: In addition to potential additional criminal and civil consequences, the employer owes Gary $48,000 for the unpaid commissions plus $48,000 for the penalty which is $3,200 per day times 15 days.

Spangler and de Stefano, PLLP assists business owners with compliance with wage and hour laws, including commissioned owed to employees.

The material contained herein is for informational purposes only, and is not intended to create or constitute an attorney-client relationship between Spangler and de Stefano, PLLP and the reader. The information contained herein is not offered as legal advice and should not be construed as legal advice.