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Patrick, Esq.
Patrick, Esq., Lawyer
Category: Employment Law
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My partner works as a contract salesman for a company. He is

Customer Question

My partner works as a contract salesman for a company. He is not an employee but he receives a guaranteed minimum commission each month in addition to any additional commissions above that minimum rate. He is considered an independent contractor and no taxes or other federal deductions are withheld from these payments. The owner of the company he works for has just informed him that he will be deducting one week of 'pay' for time my partner took off last week to take care of some other business. It seems to be the owner is treating him as an employee rather than a contractor and should be paying employment taxes, etc. It is my understanding that the owner can't do both, for example, can't pay him as a contractor only without withholding taxes but also try to deduct 'wages' for days he didn't work. The monthly payments he receives are NOT salary; they are commission checks. We are not sure how to proceed.
Submitted: 8 months ago.
Category: Employment Law
Expert:  Patrick, Esq. replied 8 months ago.

Hello and welcome. My name is ***** ***** it will be my pleasure to assist you. Please just give me a moment to review your question....

Expert:  Patrick, Esq. replied 8 months ago.

You are correct that an employer cannot benefit from independent contractor status and at the same time treat their contractors like employees. That said, deducting from a contractor's pay for a week they don't work doesn't indicate they are being treated like an employee, as general principles of contract law would likely entitle the employer to make a pro rata reduction a contractor's compensation in the same manner as if they were an employee.

Typically, the position to take here is that the contract does not specifically authorize deductions for weeks in which work is not performed and that you will need to file a small claims action if the money is not paid. Ultimately, though, a small claims laws would have a questionable likelihood of success, since the judge might very well find that a pro rata reduction from a contractor's compensation is not improper under the circumstances.

If I can clarify anything at all for you, please do not hesitate to ask. It is my pleasure to assist you further if necessary....

Customer: replied 8 months ago.
The issue at hand is that he is not paid for hours worked. He is simply paid commission for sales generated through his efforts. He is the only sales contractor for the company, so if $10,000 in sales were booked last week, it makes no difference that he was 'on vacation.' The owner can't simply tell him that because he was out of town that the commissions are now owed. Once again, this is not an hourly wage or any type of salary, it is commission only. I am not sure how he can take this reduction or what the amount could even be based upon. If he works for an agreed upon $1000 per week and didn't work last week, then yes, it makes sense that he wouldn't get paid. But the owner is planning to deduct money from his commission check for October for the days 'missed' last week, which makes even less sense because those days were all in November. I feel he is being misclassified as an employee rather than a commissioned sales person who controls his own schedule and hours.We do not want to file a claim, just to avoid tax penalties or problems with the IRS later on. Should we take any steps to have him reclassified as an employee? He is planning to just move on but wants to avoid this in the future.
Expert:  Patrick, Esq. replied 8 months ago.

Thank you, ***** ***** Based on what you are now describing this wouldn't be permissible regardless of whether he was a contractor or employee. So, it's not so much an issue of treating him like an employee, it's matter of doing something that is a violation of the employment contract--that's the case regardless of how he's classified.

His remedy would be to threaten to sue for breach of contract. If this is simply an issue of deducting from earned commissions, he should have no trouble obtaining a judgment for the deducted amounts in small claims court, barring a clause in his contract that specifically permits this sort of reduction.

Again if there is anything more I can do for you just let me know. It's my pleasure....

Expert:  Patrick, Esq. replied 8 months ago.

I just wanted to followup--was there anything else I can do to assist you? Please let me know....