A company’s refusal to pay a South Carolina salesperson all unpaid commissions that the employee has earned can have devastating consequences. Employees, especially those who are wholly or partially commission-based, rely upon the prompt payment of earned commissions. A regular salary or hourly wage is far more consistent and predictable than commissions, and even a short delay in the payment of earned commissions can cause havoc on an employee’s financial position.
Unpaid commissions are, along with unpaid bonuses, the most common type of unpaid wages claim I tend to see. Plenty of employees call our office about one or two paychecks not being paid, but for the most part, the amount of money owed simply doesn’t justify an attorney’s involvement. For those, we tend to refer to S.C. Department of Labor to file a wage complaint or to magistrate’s court/small claims court to file a lawsuit on their own.
Bonuses are usually covered under the South Carolina Payment of Wages Act, and I will bring a lawsuit based on that law, along with a breach of contract claim for the amounts owed. As I’ve discussed before, the PWA provides for the potential award of treble damages (three times the amount owed) and attorney’s fees.
What are Unpaid Commissions under S.C. Code Section 39-65-10?
Commissions, in some cases, are governed by a provision separate from the Wage Payment Act. This separate provision is called the “Payment of Post-Termination Claims to Sales Representatives,” S.C. Code Section 39-65-10 and following. A unpaid commissions case can still be brought under the Wage Payment Act, but there are some strategic benefits to Section 39-65-10 for commissions that we’ll discuss below.
Under this statute, commissions are specifically defined to mean “compensation accruing to a sales representative for payment by a principal, the rate of which is expressed as a percentage of the amount of orders or sales or as a specified amount of each order or sale.” If you get paid a percentage of a sale you make, then that’s a commission. This statute also applies to independent contractors, not just employees. (For why this matters, read here.)
But that’s not the only step. For a salesman to qualify under this law, the salesman has to be working for a company that is manufacturing, producing, importing, or distributing a tangible product for wholesale. In other words, you can’t be selling a particular product to the end-user or ultimate consumer. An employee on the sales floor making a pitch directly to the everyday customer won’t qualify.
What Are the Potential Remedies/Damages under this Section for Unpaid Commissions?
If you meet the criteria for a “sales rep” under this section, then you can bring an action for unpaid commissions and seek ALL amounts due to the salesperson PLUS punitive damages up to three times the amount owed. (Under the PWA, you can only seek a max of three times the amount owed. Also, there’s no requirement that the employer have at least five employees, like there is under the Payment of Wages Act.) The salesperson can also seek attorney’s fees and costs, which is mandatory, unlike the Payment of Wages Act, for which an attorney’s fee award is discretionary by the judge.
So what happens to your commissions if you get terminated? Well, the law requires the company to pay the salesperson all commissions that have or will accrue under the contract according to the terms of that same contract. The question becomes, which of your commissions have or will accrue according to the contract terms? In effect, what have you EARNED already that the company is obligated to pay?
The answer will depend very much on how the contract for commissions is written. If your contact says you earned the commission when you make the sale, regardless of whether the material ever ships, then the contract will govern. However, if it says you don’t earn the commission until much later, such as when the payment is received by the company, then you’ll have a much harder time making the claim that you’ve already earned it.
Takeaways for South Carolina Salespeople
For any salesperson, keeping independent track of your sales numbers is always a good idea. You’ll be better able to review your commission payments and make sure they match up with your own numbers.
Also, don’t delay. If you’re missing commissions or the company has changed how they pay you, you need to lodge some sort of written protest, otherwise your continued acceptance of the new terms may be binding on you later. If other salespeople are having the same issue, you can talk together about how to proceed. Such collective discussion and protest is protected activity under the National Labor Relations Act and any retaliation by the company can be reported to the National Labor Relations Board (NLRB).
If all else fails, you can contact a South Carolina employment lawyer to discuss your unpaid commissions case in more detail.