RBS News

All wages earned by an employee must be paid upon termination, and by definition, commissions and bonuses are considered wages.  However, commission payments are unique and present special issues regarding the time that all final wages are paid. Most employers that pay commissions to sales employees do so under the terms of a sales compensation plan, bonus plan or other written arrangement.  In such plans, employers should define when a commission is “earned” and under what circumstances a commission may be “forfeited.”  In Ohio, an employer is permitted to include in its sales compensation plan terms which limit or eliminate the payment of post-termination sales commissions.  Ulmann v. May, 147 Ohio St. 468. Additionally, employers can limit commission to that earned while employed, and thus a sales representative would not be entitled to commissions for sales that closed after his or her termination.   Padula v. Wagner, 2015-Ohio-2374.  

Commission disputes are quite common, especially following termination. Drafting ambiguous or vague compensation plans can further complicate such disputes.  Employers should therefore carefully review their compensation plans and eliminate potential doubt as to the eligibility for commissions and bonus payments.  Such plan should address what actions must be taken to earn a commission payment; whether the employer can deduct commissions from future commission; how splits are handled when one or more employee is responsible for a sale; who bears the risk for nonpayment by a customer; whether commissions are paid on amounts billed or monies received; if commissions can be earned or paid post-termination; and the formula for calculating commissions or bonuses.