What happens to your commissions if you’re fired or quit?
It is not uncommon for some employees to be paid on commission rather than, or even in addition to, receiving other forms of compensation. For example, people working in the sales industry are usually, wholly or in part, paid based on a sales commission—i.e., a sum of money paid to the employee upon her or his completion of a task, usually selling a certain amount of goods or services. Unlike employees paid on an hourly or salary basis, employees paid on commission typically receive their pay at less frequent intervals—sometimes even months or years after the work giving rise to the commission was performed. As a result, employees paid on commission are at greater risk of being unaware of, or misled regarding, their rights to receive their just compensation after leaving or being fired from their employer.
Generally, when a person ceases to be employed by their employer, Oregon law imposes an absolute mandate on their employer to immediately pay all of the employee’s “wages” that have been “earned.”[1] In Oregon, an employee’s “wages” typically include all compensation promised by the employer for the performance of some service, including a promise to pay commission.[2] In fact, Oregon is just one of approximately several States that classifies commissions as “wages” under its wage laws.[3]
An employee’s wages are considered “earned” once they have performed the work for which the employer promised compensation.[4] However, an employee and employer may, subject to some limitation, contract to place conditions upon the payment of wages based on an event other than time worked.[5] Nevertheless, once an employee earned their wages, the employer cannot retroactively reduce them.[6] This also means that once an employee earned their commission, the employer cannot reduce it as a result of the employee’s termination. Furthermore, the employer is obligated to pay all earned commission upon the termination of the employee’s employment. Failure to do so may result in the employee having a right to statutory penalties, potentially including attorney fees, in addition to the employee’s unpaid wages.
The sooner a claim is asserted, the more likely it is that a favorable outcome may be achieved. The same applies if you are an employer defending against a potential wage claim. Contact Engrav Law Office by emailing grant@engravlawoffice.com (please put commission wage claim in the subject line and do not insert any other information) if you believe you think you have or may be liable for a potential wage claim.
[1] ORS 652.140 et seq.
[2] See Hekker v. Sabre Constr. Co.,265 Or 552, 559-560, 510 P2d 347, 351 (1973).
[3] See e.g., Community Telecommunications Corp. v. Loughran, 651 A. 2d 373 (Me., 1994) (citing Oregon as one of several jurisdictions where commissions are wages for the purpose of state wage and hour laws); Hofer v. Polly Little Realtors, Inc., 543 P. 2d 114, 116 (Co. 1975); Licocci v. Cardinal Assocs., 492 N.E. 2d 48, 56 (Ind. 1986); Brown v. Navarre Chevrolet, Inc., 610 So. 2d 165, 169 (La. 1992).
[4] ORS 652.140; Schulstad v. Hudson Oil Company, Inc., 55 Or App 323, 327, 637 P2d 1334 (1981).
[5] See e.g., Walker v. American Optical Corp., 265 Or 327, 509 P2d 439 (1973).
[6] See OLSON v. F & D Publ’g CO., 160 Or App 582, 588, 982 P2d 556, 560 (1999) (citing as support Hughes v. State of Oregon, 314 Or 1, 838 P2d 1018 (1992)).
