New Requirements for Commissioned Salespersons in New York State

As of October 16, 2007, all employers of commissioned salespersons in New York State, regardless of industry, must have a written agreement containing the following terms of employment:

1. A description of how wages, salary, draw on commissions, commissions, and all other amounts earned and payable are to be calculated;

2. The frequency of reconciliation between draw and earned commissions, where the writing provides for a recoverable draw; and

3. Details regarding payment of wages, salary, draw, commissions and all other monies earned and payable in case of a termination of employment by either party.

New York Labor Law Sec. 191(c) was amended to include these minimum provisions. The law also requires the agreement to be signed by both employer and employee and requires the employer to retain the signed agreement for a minimum of three (3) years.

An employer’s failure to prepare this agreement and have it executed, or not update an existing agreement, may impair their ability to win a commission dispute in the future. If there is no agreement or the agreement does not comply with the new law, the presumption will be that the salesperson’s description of the commission agreement will be more accurate than the employer’s description. That means the employee wins and the employer loses.

It is important to note that if an employee is an employee “at will,” the agreement should make this point clear in order to make sure additional employment rights between employee and employer are not created.

You may already have a written commission agreement in place; however, it may not comply with the law’s changes. The bottom line, it is time to put all your commission agreements in writing and update your current agreements to comply with the Labor Law Sec. 191(c). To make sure you are in compliance, contact an attorney familiar with the new law.