EMPLOYEES PAID ON COMMISSION

A Pennsylvania sales representative quit his job when his draws against commissions were $38,000 more than the commissions he actually earned. In a suit by the corporation to collect the overdraws, the Pennsylvania Supreme Court found that independent sales representatives can sometimes be liable for paying back draws against commissions. Recognizing that large corporate employers sometimes have superior bargaining power in contract signings, the court also observed that many corporate employers are small family-run businesses that may be dealing with very experienced sales representatives. The court declined to adopt any broad rule of law favoring businesses or sales representatives, deciding, instead, that principles of contract law should control legal disputes between sales representatives and businesses.

Where an agreement clearly provides that a sales representative will have to pay back draws in excess of earned commissions, the courts will enforce the agreement. But if there is no mention of the representative's responsibility to reimburse for overdraws, the draws may be treated as salary. Where commission payments will be paid in advance, it is advisable for business owners and sales representatives to carefully negotiate the sales contracts and pay close attention to the contracts' legal language.

The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.

Copyright © 2002 by Davis Bennett & Spiess LLC, Attorneys at Law. All rights reserved. You may reproduce materials available at this site for your own personal use and for non-commercial distribution. All copies must include this copyright statement.