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Ahead of the Curve Auto Supplier Blog

February 25, 2013

Commissioned Sales Representatives: Failure to Pay the Commission

Under the Michigan Sales Representative Act, you are required to pay your sales representative his commission “when due.”  The due date of a commission is determined by the contract, so it is important that the date specified in a sales commission contract is clear about any prerequisites to payment.  For example, a contract might state that payment is due after the sales person has returned any unsold products; and, if for any reason, the sales representative relationship ends, the sales representative may still be entitled to commissions due under the sales commission contract (which must be paid within 45 days after the relationship ends). Failing to pay a sales representative commissions that are due may lead to litigation and possible penalties under the Act.  The penalty for failing to pay commissions that are due can be significant - commission plus any losses the sales representative incurred from the failure to receive commissions when they were due.  There may be additional penalties if the failure to pay is found to be “intentional.”  Even though the sales commission contract cannot limit the penalties for failure to pay sales commissions, a well-drafted contract that specifically defines when commission is due may reduce the risk of penalties.  It is always best to be proactive and careful to ensure that your contract is properly drafted to minimize that risk.  

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