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Patrick, Esq.
Patrick, Esq., Lawyer
Category: California Employment Law
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Experience:  Significant experience in all areas of employment law.
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Im a company manager for a small business. I had a verbal

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I'm a company manager for a small business. I had a verbal agreement to pay comm on a sale to an independent contractor who would not sign a 1099. He brokered a sale, but the sale went through 1 day after he was fired from the company. Our commission structure has changed since he was terminated. We are willing to pay him the new comm structure, but he's threatening to take us to small claims court. The disputed amount is $1000. Are we entitled to pay him commission at all since the deal didn't close until after he was terminated? If so, must it be on the agreed on amount of $1000? Or the new structure of $375?
Submitted: 1 year ago.
Category: California Employment Law
Expert:  Patrick, Esq. replied 1 year ago.
Hello and thank you for entrusting me to answer your question. I am sorry to hear of this contract dispute.

Verbal commission agreements constitute enforceable contracts in the state of California, and contracts cannot be modified without the consent of both parties. So, the initial verbal commission agreement between you and this contractor would be controlling.

With regard to entitlement to this particular commission, California has developed what is known as the "procuring cause" doctrine. The procuring cause doctrine provides that an employee is entitled to commissions, even if he or she leaves the company before closing the deal, if he or she "procured" the sale.

In Brea v. McGlashan, 3 Cal. App. 2d 454, the court, in determining whether a finding that the plaintiff was the procuring cause of obtaining certain advertising contracts was sustained by the evidence, said: "The word 'procure' does not necessarily imply the formal consummation of an agreement. ... In its broadest sense, the word means to prevail upon, induce or persuade a person to do something. ... The originating cause, which ultimately led to the conclusion of the transaction, is held to be the procuring cause."

So, unless you can argue that you or other workers at your company performed acts that induced the sale, and that the sale would not have been consummated but for these acts, the procuring cause doctrine would entitle your former contractor to commission even though he was not an employee at the time the sale actually closed.

To summarize, you will need to consider whether you can argue that this individual was not the procuring cause of the sale. If you have a reasonable argument to that effect, then you may be able to successfully defend against the claim. Otherwise, the original verbal contract would be controlling and the procuring cause doctrine would mandate payment under the circumstances.

Please do not hesitate to let me know if you have any questions or concerns regarding the above and I will be more than happy to assist you further.

If you do not require any further assistance, please be so kind as to provide a positive rating of my service so that I may receive credit for assisting you. Very best wishes to you and thank you so much for coming to Just Answer.
Customer: replied 1 year ago.

I have an inside sales rep who has made multiple contacts and negotiations with the client. All emails are documented and calls logged on an excel spreadsheet. I cannot say for sure that his efforts were the deciding factor in the sale.


 


We are a group of companies under the same owners. This guy was a w-2 employee for another company in the group selling similar products. The customer would not purchase products from the other company because their pricing was too high. I know for a fact that the customer purchased from us because of our ability to offer lower prices, and continues to purchase from us because of the lower prices regardless of the sales rep.


 


To be honest, I messed up and offered the wrong commission ($1000) and was later told that the original amount was too high and only $375 could be paid out.


 


If our records showing the customer had been contacted by our w-2 sales reps, and the deciding factor to buy was based on price, does that mean the guy threatening to sue us falls outside of the procuring cause doctrine? If not, would my mistake make the company liable for payment, or myself in small claims court?


 


I want to pay the guy, but I want to pay him the right amount.


 


 

Expert:  Patrick, Esq. replied 1 year ago.
Chris,

Thank you very much for your reply.

Whether or not an individual is the procuring cause of a sale is a "question of fact," meaning that ultimately it will come down to the factual determinations made by the small claims judge in consideration of all relevant circumstances. Nobody but the small claims judge can say for certain how he/she will rule.

It sounds like you have a potential argument that the employee claiming this commission was not the procuring cause of the sale. However, I am unconvinced by the pricepoint argument, since that's a selling point that any salesperson can make use of. To say that a salesperson didn't "induce" a sale because the price was the reason the customer made the purchase would be a way of discrediting just about any sale (i.e. "the customer would have bought it no matter what because it's such a great product.") This is not what the procuring cause doctrine is intended to address and, if adopted as law, would lead down a slipperly slope where employers would never have to pay commissions at all.

If this individual can prove he procured the sale, the company will be liable for the amount he is suing for unless you dispute the veracity of his claims regarding the verbal agreement,.

However, even if you made a mistake by offering the higher commission and a judgment is obtained, your company cannot hold you legally responsible for that amount. Employers must, as a matter of public policy, bear the risk of doing business and cannot shoulder that risk off on their employees by forcing them to account for errors that cost the business money.

Again, please feel free to let me know if you have any further concerns. If I have answered your question, I would be very grateful for a positive rating of my service so that I may receive credit for assisting you.

Kindest regards.
Customer: replied 1 year ago.

I get the discrediting of any sales person, but I feel these circumstances are a bit different.


 


One company supplies the other with product. My company happens to be the supplier which allows us to discount.


 


The customer has stated that the reason for his decision was based on pricing, which is why the guy threatening to sue did not invoice through the other company as it is the exact same product, not just a similar product. Like buying a can of coke directly from coca cola vs. walmart.


 


Would this make a difference?

Expert:  Patrick, Esq. replied 1 year ago.
Perhaps it would to the judge. Again, this is a "question of fact" that is decided in consideration of all the unique circumstances of the case.

Personally, I am not convinced by the agrument, at least not by itself, because the procuring cause doctrine examines the efforts directed toward connsumation of a sale, and a price is not an "effort" it is, if anything, merely an advantage.

I hope that makes sense. I'm not saying you don't have a case, I'm just saying I wouldn't hang my hat on this particular argument.

Good luck to you, and please if you have found my answers to be helpful remember to provide a positive rating of my service, as this is the only way I am credited for my time.

Best of luck moving forward.

lower price your company was able to offer
Patrick, Esq., Lawyer
Satisfied Customers: 7025
Experience: Significant experience in all areas of employment law.
Patrick, Esq. and 2 other California Employment Law Specialists are ready to help you

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