Employment law attorneys are frequently consulted about unpaid sales commissions which an employer refuses to pay to a terminated employee. In a recent case, Sherman v. Composition Systems, Inc, 2013 U.S. Dist. LEXIS 114570 (E. D. Pa. August 13, 2013)(Baylson, J.), the court considered this issue noting there are circumstances in which an employee is entitled to unpaid commissions. In Sherman, a former salesman filed an action against his former employer alleging breach of contract and violation of the Pennsylvania Wage Payment and Collection Law (“WCPL”), arising out of his former employer’s refusal to pay sales commissions.
During his employment, the Plaintiff pursued two large customers which ultimately purchased substantial amounts of Defendant’s printing services. Plaintiff was terminated before the vast majority of Defendant’s sales to the two large customers were formally concluded. The employer refused to pay the commissions on those sales, asserting that the terms of the employment agreement precluded collecting commissions for sales concluded after termination, and, in any event, the Plaintiff had never actually secured sales agreements with either company, and another salesperson was ultimately responsible for the sales. The plaintiff employee argued that the “efficient procuring cause doctrine” entitled him to commissions on certain sales, even though the sales were concluded after the Defendant terminated him.
The “efficient procuring cause doctrine” allows a salesperson to claim commissions for sales completed after his termination, so long as the salesperson: (1) had a contract of employment;(2) presented the employer with a purchaser who was “ready, willing and able to purchase on terms that were satisfactory to the employer; and (3) caused the sale to take place.
In Sherman, the Court noted that there are limitations under Pennsylvania law for instance, merely conducting negotiations is not enough; and a salesperson is not entitled to a commission simply by presenting a willing buyer or if the deal is later struck on different terms that proposed by the salesperson. ultimately, under Pennsylvania law, the contract between the parties governs whether specific wages or commissions are earned for the purpose of the WPCL. However, the Court also made it clear that under applicable law for an employment contract to preclude collecting commissions, it must clearly exclude collection of post employment commissions and the “efficient procuring cause doctrine” can apply to all types of salespeople not just real estate brokers.
Ultimately, the Court concluded that it cannot rule out that Plaintiff was responsible for securing at least some of the sales at issue, particularly those sales concluded shortly after Plaintiff’s termination which created a genuine dispute regarding fact issues material to the Court’s determination of whether Plaintiff is entitled to the disputed commissions, and, therefore, summary judgment could not be granted.
For more information on unpaid sales commissions, the Pennsylvania Wage Payment and Collection Law and Abramson Employment Law see http://www.job-discrimination.com/lawyer-attorney-2122061.html