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Horton Law Firm Blog Departure Policies: What Happens if You Are Fired before Your Bonus/Commissions are Paid?

Departure Policies:  What Happens if You Are Fired before Your Bonus/Commissions are Paid?

Pay ToSimple questions deserve simple answers.  Unfortunately, in the case of employee departure policies, the question stated above is not as simple as it appears.  Like much in law, it depends on the facts, and different facts sometimes mandate different outcomes.  And, when an employee who works in exchange for bonuses and/or commissions is terminated before payment, the cases answering the question “what happens?” offer different answers.  The goal is to find a case which gives the answer you want to your questions and then argue that your situation is more like that case than the cases giving the opposite answer.

The first South Carolina case to address this question was Rice v. Multimedia, Inc., 318 S.C. 95, 456 S.E.2d 381 (S.C. 1995). The basic facts were as follows:  In 1983, Rice was hired as a radio advertising salesperson for WFBC AM/FM, a division of Multimedia. In 1989, Rice also began employment as National Sales Manager for the Clemson Sports Network (CSN), another division of Multimedia.

In June 1990, Rice was terminated. Rice filed suit, demanding payment for commissions due on seven contracts, three of which covered local advertising for WFBC and four of which covered advertising for CSN. WFBC’s employee handbook provided that sales commissions would be paid to a departing employee only for those advertisements sold by the employee and actually broadcast through the end of the month in which the employee worked his last day. Pursuant to this departure policy, Multimedia refused to pay commissions on the above seven contracts since the advertisements had not been broadcast.

Under the South Carolina Wage Payment Statute, an employee must be paid “wages due.”  Rice contended that having secured the contracts which resulted in income to WFBC, he was entitled to his commission on these contracts.  His argument was that his commissions were “wages due.” On the other hand, Multimedia explained that its departure policy was fairly standard in the broadcast advertising business. In order to ensure that the salesperson gave continuing service to the client after the sale, the commissions were withheld until the advertisement was actually broadcast.

The Court’s answer:  “Multimedia’s departure policy establishes the manner in which it will pay sales commissions. It is not arbitrary nor does not violate any law. Accordingly, we agree with the Trial Court that it is not void as against public policy.”

Ouch!  Apparently, as long as their is a written policy and there is at least some minimal or theoretical additional service to the client to be done, the employee can be denied his commission.  Stated another way, an employee can do the heavy lifting necessary to close the deal and 95% of the work, but if he is fired before work under the contracts are 100% complete, he can be denied the fruits of their labor.

Fortunately, this was not the last word on this subject.  There are other South Carolina cases which reach a different conclusion by focusing on different facts.  The next posts will explore these more recent cases that provide greater protection for employees.

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