While commissions and bonuses are subject to the various laws that regulate wages, such as the FLSA and the Texas Payday Law, they are unique in rather important manners. The most obvious way that they differ from hourly-based and salary-based wages is when they are considered “earned.” Put another way, if you are an hourly worker, your wages are considered earned as soon as you start working. If you have worked for an hour, you have earned an hour’s worth of wages. If you have worked half an hour, you have half of your hourly wage. It is simple. But this same inquiry varies dramatically with workers who earn their wages based on commissions.
This determination is based on what the specific agreement between the employee and their employer mandates. There are various types of commission bonus structures that have vastly differing timeframes and timelines of when commissions are considered earned. For example, I have seen commissions being earned as soon as the customer signs the contract for the sale of some type of good, at the time the company actually receives the payment for the goods, and even one that states that commissions are earned only if the employee is employed at the close of the fiscal quarter.
Each of these clauses can have a significant impact on whether an employee is able to have a successful claim for unpaid commissions. By way of example, in the three scenarios I gave above, if a salesperson was fired right after he closed a deal, but before the company got payment, the first salesperson would have the strongest claim for unpaid commissions under the Texas Payday law and breach of contract.
But not to worry, the other two salespeople could potentially recover, but they would need to explore alternative causes of actions. Indeed, while under the Texas Payday law and contract law, the first employee would have the best chance of succeeding, there are several other types of causes of action that may prove fruitful for workers who feel like they have been wronged.
For example, let’s say that you have an agreement with your employer in which your commissions are paid out and earned on a quarterly basis. You have had an amazing quarter, and you will be receiving a sizable commission in just a week or two. What would happen if your employer decided to fire you right before the end of the quarter just so they could keep your commissions? Well, under the Texas Payday law and even breach of contract law, it would be difficult for you to be able to recover. But you may be able to avail yourself of other causes action like fraud.
Moreover, it is imperative to note that just because you do not have an express written agreement does not mean you cannot recover unpaid commissions. While written agreements are helpful because they can bring clarity to a situation, you can recover even if you do not have an express written contract. Under the legal theories of promissory estoppel and quantum meruit, employees can potentially recover if certain conditions are met. For example, under promissory estoppel, all you need to show is that there was a promise to pay a commission, your employer could foresee that you would rely on this promise, and you substantially relied on the promise to your detriment.
If you suspect that you may be owed commissions, you should act quickly. While breach of contract, quantum meruit, and promissory estoppel have rather long statutes of limitations, the Texas Payday law requires employees to submit a claim within 180 days from when they should have gotten paid. Further, as one can see, whether or not you can recover unpaid commissions can get rather tricky. That is why it is important to get an opinion from a Texas Employment Lawyer that is experienced in employment law. Contact us today to set up a consultation.