Can an Employee Collect Unpaid Commissions After Their Employment Is Terminated?

Jun 28 2023

Amanda DeMatteis: Hi, Josh.

Josh Goodbaum: Hi, Amanda. What are we talking about today?

DeMatteis: I thought we would talk about commissions. So, let’s imagine we have a client that comes in to us and says, “Hey, look, I worked X months of the year, and I earned a number of commissions, and then I was terminated. But I was terminated before the date that those commissions were going to be paid. And the policy of my employer says, ‘If you’re not employed on the date that these commissions actually get paid, you don’t get them.’” What do you tell that client?

Goodbaum: I tell them, I’m sorry. And then I tell them this is a bit complicated, so I want you to bear with me. There are three different doctrines under Connecticut law that are implicated here. The first is the concept of wrongful termination; the second is wage law – and the Connecticut Wage Act in particular; and the third is breach of contract and other related issues.

So under the first, it is not an unlawful termination for your employer to terminate you in order to avoid paying a commission. In other words, you don’t have a cause of action for wrongful termination — you can’t get your job back, and you can’t sue for damages associated with the termination itself. That’s issue number one.

Issue number two: Are these commissions a “wage”? And the Connecticut Supreme Court has said that a wage is defined however the employee and the employer agree it’s going to be defined. So, if the commission agreement says, “You don’t get your commission until the client pays their bill, and if you’re not employed when the client pays their bill, you don’t get it,” then the client paying their bill and your continued employment on that date are conditions precedent to the existence of a wage. In other words, they’re things that have to happen first in order for it to be a wage. And if you’ve agreed that if you’re not employed, you’re not entitled to it, then it’s not a wage. You can’t sue under the Connecticut Wage Act.

But issue number three: All hope is not lost, because you can sue for breach of contract, or more specifically for the breach of the implied covenant of good faith and fair dealing. The covenant of good faith and fair dealing is implied into every contract, whether it’s written or verbal — at least in Connecticut, but I think everywhere. And the basic idea is that the parties can’t act in a discretionary fashion to frustrate the purposes of the contract and the aims of the other party. So if your employer – knowing that you are working pursuant to a commission agreement – lets you do all this work, earn the commission, and then tries to pull the rug out from under you when you’re entitled to the commission in order that you not actually get the commission, that would be acting in bad faith.

Now, you’d need to show that the reason that the employer terminated you was to frustrate the purpose – in other words, to keep you from earning the commission. If the reason you were terminated is because you punched your boss in the face, you’re gonna have a hard time proving that your employer acted in bad faith in order to deprive you of the commission.

But the short answer to this – or the short summary of this long answer to this reasonable question – is: there is a way that you can get this commission, but you need to prove that your employer was acting in bad faith when it terminated you and that it did so in order to deprive you of the commission.

So if your employer terminates you in order to deprive you of receiving a large commission that you have earned through your work, all hope is not lost. There is an avenue to try to recover that commission.

DeMatteis: For Connecticut employees whose pay is sometimes through commissions, this is really important information. I’m glad you shared it with them. Thanks, Josh, and we’ll see you next time.

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amanda dematteis on terminated employees' unpaid commissions

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