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A Better Partnership

Ahead of the Curve Auto Supplier Blog

February 18, 2013

Commissioned Sales Representatives: Wages Laws

Under the Michigan Sales Representative Act, a “sales representative” is any person employed to sells goods who “is paid, in whole or in part, by commission.”  Therefore, if any part of your employee’s compensation is earned on a commission basis, no matter how small that part may be, he or she is considered a sales representative. Your sales representative may be protected by various wage laws.  If your sales representative spends more than fifty percent of his or her  job time working for you, you are required by the Fair Labor Standards Act to pay the minimum wage.  Currently, the minimum wage in Michigan is $7.40 per hour.  If your sales representative’s commission payments do not meet the minimum wage, you are required to pay the difference. If your sales representative is not considered your employee, the minimum wage laws do not apply.  However, the line between an employee and an outside sales representative is a blurry one.  It is wise to discuss your employment structure with an attorney to clarify the nature of your employment relationships.  A carefully drafted contract may help to establish your sales representative as a non-employee, but in some cases proactive compliance with wage laws may be the only safe approach.  Additionally, Michigan law generally prohibits a company from taking deductions from a sales representative’s commission.  You may want to speak with your attorney about including language in a sales commission contract that will address how the sales representative is to repay the company for any costs that need to be reimbursed.  Failure to comply with Michigan and federal wage laws may expose you to litigation and severe penalties.  You should be careful and proactive about your employment and compensation structure to ensure that you are in compliance with these laws.

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