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Ask MShore Your Own Question
MShore, Attorney
Category: Legal
Satisfied Customers: 25285
Experience:  Negotiate, Draft, and Review many complex commercial agreements each year.
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Are outstanding sales commissions payable (due)upon the departure

Resolved Question:

Are outstanding sales commissions payable (due)upon the departure of the sale person?
Submitted: 7 years ago.
Category: Legal
Expert:  MShore replied 7 years ago.
it depends on the company's policy and/or the terms of the employment agreement entered into, if applicable.
Customer: replied 7 years ago.
We might need to dig a bit further into some details. I can submit my plan for interpretation but I just also included some further details above if that helps. Also, I believe that California is a bit more liberal towards the sales person/employee given these conditions.
Expert:  MShore replied 7 years ago.
ok, let me know when you are able to discuss further.
Customer: replied 7 years ago.

I can do it anytime, this is a pretty high priority. Does it make sense to speak on the phone and do you want a copy of my compensation plan? Do you specialize in employment/compensation law? Where do you practice? I am assuming that different states have slightly different laws/interpretations. Please let me know how you would like to proceed.




Expert:  MShore replied 7 years ago.
<p>I am not able to speak with you on the phone per JA rules. Additionally, the review of your compensation plan would be beyond the scope of the Q&A here on Just Answer. When you return, please contact me.</p><p> </p><p> </p>
Customer: replied 7 years ago.
Have you been able to see the summary of my input up to this point? I need a basic ruling on California compensation regarding commissions that are earned and/or payable based on my current situation. I guess the basic question is "do companies ordinarily need to pay their outgoing employees the commissions that are secured through deals that are closed, even if the compensation plan states that these commissions are payable to said employee over the term of the contract"? The compensation plan is not clear, meaning that it says that all commissions "earned" up to the point of departure are payable upon leaving the company. My interpretation of "earned" is that the deal is done and work has begun. I believe my company's interpretation of "earned" is that the company has been paid for this work by the customer and only when those payments are received is the commission earned, big difference. Thanks for anything that you can share.
Expert:  MShore replied 7 years ago.
Unfortunately, your company's interpretation is correct. "Earned" means that the customer has paid, not that the customer has entered into an agreement to pay.
Customer: replied 7 years ago.

Yes, I understand from an accounting and revenue recognition perspective between the customer and my company what "earned' means. The contract that I finalize with the customer secures that agreement and begins the work effort. My point is that in my agreement the reference to "earned" in no means reflects or describes the revenue from the customer but my contribution to the sales effort or the deals that I have secured, which is somewhat vague and misleading. Do you specialize in employee compensation law or have insight into the laws of California? Thanks

Expert:  MShore replied 7 years ago.
Yes, to both.
Customer: replied 7 years ago.

We are not making much progress here. Do you understand my situation and can you provide an opinion based on California law, outstanding commissions and what I have provided thus far? Thanks

Expert:  MShore replied 7 years ago.
my opinion is that the commissions are not considered earned until the customer has paid. This opinion is consistent with the California Code. See <a href=""></a> for verification.
Customer: replied 7 years ago.

This is the exact wording in my agreement:

"In the event the participant terminates from Company, transfers internally or is promoted to a different compensation category, the former participant is eligible to receive commissions/bonuses earned up the the effective date of such change. For purposes of this plan, when the participant's employment with Olive terminates, the last day of work is defined as the last day on which work duties were actually performed by the participant, as reasonably determined by the company".


You are saying, based on the interpretation of the document that you sent me a link to, that "earned" means those dollars that have been paid to the company, which commissions are to be based on and paid from, and that the language above implies the same thing? My interpretation is that "earned" means that I have done my part to secure the contract from the customer and that no additional selling is needed and therefore those commissions are earned. I don't know that both references to "earned" mean the same thing, which is probably the key point here.


Does your opinion change any with the above details?



Expert:  MShore replied 7 years ago.
unfortunately not. earned means when the customer has paid and the work completed.
Customer: replied 7 years ago.

I just did a search on Google on my subject and this string has surfaced. Is this e-mail exchange not behind a secured wall within your group?

Expert:  MShore replied 7 years ago.
I do not have any input or control on the accessibility of the string, the security of the exchange would be handled by customer service.
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