Unpaid Commissions Lawyer in New York City

Commission disputes Reza Yassi handles

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• Earned commissions an employer has not paid, paid late or cut

• Commissions on deals that close or pay out after you quit or were let go

• Draw, chargeback and clawback disputes

• Plan changes and calculation fights over rates, splits and account credit

• Independent sales representatives owed commissions by a manufacturer or distributor, and companies facing those claims

• Real estate broker and finder's fee disputes, for the broker or finder or for the party asked to pay

• Freelance Isn't Free Act payment claims by one-person contractors

• For businesses: defending commission claims and reviewing existing plans and rep agreements

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Are commissions considered wages in New York?

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Yes, for employees. New York defines wages as earnings for labor or services, whether figured by time, piece, commission or another basis (Labor Law § 190(1)).

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When a commission is earned depends on your agreement. Absent other terms, the traditional rule is that it is earned when the salesperson produces a customer ready, willing and able to deal on the employer's terms. A plan can add conditions, such as customer payment or a formula that subtracts returns, and the commission is then earned only when they are met.

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Once earned, a commission cannot be forfeited. Courts apply a long-standing policy against forfeiting earned wages, and an unclear plan is read against the employer that wrote it (Arbeeny v. Kennedy Executive Search, Inc., 71 A.D.3d 177 (1st Dep't 2010)).

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When must sales commissions be paid? Labor Law § 191

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At least once a month, and no later than the last day of the month after the month the commission was earned (Labor Law § 191(1)(c)). If the regular monthly pay is substantial, bonuses and other incentive pay may be paid less often, but no later than the plan provides.

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These rules cover a commission salesperson: an employee whose main job is selling goods, services, real estate, securities, insurance or anything else, paid at least partly by commission. Employees whose main job is supervising, managing or administering are not included (§ 190(6)), and executives earning more than $1,300 a week fall outside § 191's timing rules (§ 190(7)), though they can still sue on their agreement.

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For a commission salesperson the law also requires:

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• Written terms signed by both the employer and the salesperson, kept by the employer for at least three years

• A description of how salary, draws, commissions and other pay are calculated, and, for a recoverable draw, how often it is reconciled

• Terms for paying what is owed if either side ends the job

• A statement of earnings paid and earnings due, given on your written request

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If the employer cannot produce the signed terms when the Labor Commissioner asks, the terms the salesperson presents are presumed to be the agreed terms.

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Commissions after termination or resignation

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Commissions you earned before you left must still be paid. Final wages are due no later than the regular payday for the pay period in which the job ended (§ 191(3)), and a commission salesperson's signed plan must say how pay is handled after separation.

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Commissions on deals that close or pay after you leave turn on the plan. An at-will employee generally has no right to post-termination commissions unless the agreement provides one. But a clause saying nothing is due unless you are employed on the payment date cannot take away a commission already earned, and an employee may claim that a firing was designed to cut off commissions coming due (Arbeeny).

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Read the plan for the words that decide the case: when a commission is "earned", what happens to pipeline deals, and any "must be employed" or forfeiture clause. Plans that cancel unvested deferred pay if you join a competitor follow different rules; see the employee choice doctrine.

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Draws, chargebacks and clawbacks: Labor Law § 193

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An employer may take money out of earned wages, commissions included, only for reasons the law lists, such as deductions required by law, deductions you authorize in writing for your own benefit, and, under Labor Department rules, an overpayment from the employer's clerical error or repayment of a wage advance (Labor Law § 193). Making you write a check back instead does not get around the rule (§ 193(3)(a)).

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Timing decides most clawback fights. Adjustments built into the commission formula, such as returns, cancellations or unpaid customer invoices, are lawful when they apply before the commission is earned; taking money back afterward is an unlawful deduction. A guide on challenging commission clawbacks covers the advance rules in detail.

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A draw is an advance against future commissions. Whether an unearned draw must be repaid depends on the plan: a recoverable draw must be written into the signed terms with its reconciliation schedule (§ 191(1)(c)), and repaying an advance by deduction must follow the Labor Department's rules (§ 193(1)(d)).

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Independent sales representatives: Labor Law §§ 191-a to 191-c

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If you are an independent contractor who solicits wholesale orders in New York for a company that makes, imports or distributes a product, New York gives you a commission law of your own. It covers commissions figured as a percentage of wholesale orders or sales, but not someone who buys for resale on their own account (Labor Law § 191-a).

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• The contract must be in writing and say how commissions are computed and paid. The company must give you a signed copy and get your signed receipt (§ 191-b).

• During the contract, earned commissions are due within five business days after they are earned.

• When the contract ends, earned commissions are due within five business days, or within five business days after they come due if that is later (§ 191-c).

• If the contract is silent, a commission is earned once the goods are delivered to, accepted by and paid for by the customer, even if your work has ended.

• Late payment after the contract ends brings double damages, and the winning side, whichever it is, recovers reasonable attorney's fees and costs.

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Other commission-paid contractors usually sue on their contract; see breach of contract. A one-person business hired for $800 or more, counting that client's contracts over the prior 120 days, is also protected by the state Freelance Isn't Free Act, and Reza Yassi handles these claims. The contract must be in writing, and payment is due by the contract date or, if none is set, within 30 days after the work is done. A prevailing worker on a payment claim recovers double damages plus attorney's fees (General Business Law §§ 1410, 1411, 1412, 1414). Government clients are not covered, nor are § 191-a sales reps, lawyers doing legal work, licensed medical professionals or construction contractors.

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Real estate commission disputes and finder's fees

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No one can sue for a real estate commission without alleging and proving a New York broker or salesperson license on the date the claim arose (Real Property Law § 442-d).

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Unless the agreement says otherwise, the broker must be the procuring cause of the deal. Pointing the buyer to the property is not enough; there must be a direct and proximate link between the introduction and the deal that closed (Greene v. Hellman, 51 N.Y.2d 197 (1980)). See the guide to broker commission disputes.

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A finder or business broker generally needs a signed writing to collect a fee for arranging a loan or the sale of a business, even for an introduction (General Obligations Law § 5-701(a)(10)); licensed real estate brokers and salespeople are exempt. On a real estate sale or lease, an unlicensed finder generally cannot sue for a fee at all (§ 442-d). Other property fights are covered under real estate litigation.

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What you can recover for unpaid commissions

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• Employees whose claim rests on a Labor Law violation, such as commissions paid late under § 191 or taken back unlawfully under § 193: the full unpaid amount, reasonable attorney's fees, prejudgment interest, and liquidated damages equal to 100% of the unpaid wages unless the employer proves a good-faith basis for believing it paid correctly (Labor Law § 198(1-a)).

• Claims that rest only on the contract, as many executive claims do: the commissions owed plus interest, without the Labor Law's fees and liquidated damages.

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How long do you have to sue for unpaid commissions?

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• Claims under the Labor Law's wage-payment article, including § 191-c: six years, paused while a Labor Department complaint or investigation is pending (§ 198(3)).

• Breach of a commission agreement: six years from the breach (CPLR 213(2)).

• Freelance Isn't Free Act payment claims: six years (General Business Law § 1414(2)(c)).

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Labor Department complaint or lawsuit?

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For sales commissions, usually a lawsuit or arbitration. The New York State Department of Labor's unpaid wages page says it will not accept claims for commissions from sales or claims by true independent contractors.

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Most cases start with a written demand that sets out the plan terms, the deals, the amount owed and the remedies the employer faces. If that fails, the case goes to New York State Supreme Court, federal court when there is a basis for it, or arbitration if the plan requires it. A claim of $10,000 or less against an employer with an office in New York City can go to Small Claims Court (New York City Civil Court Act § 1801).

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For businesses facing a commission claim

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Reza Yassi defends companies against commission claims and reviews existing plans and rep agreements before a dispute. The hardest claims to defend usually trace back to the paperwork:

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• No signed plan for a commission salesperson, or one that skips calculation, draw reconciliation or pay after separation

• An unclear definition of when a commission is earned

• Chargebacks taken after commissions were earned instead of built into the formula

• For independent reps, no written contract or signed receipt; the fee rule in § 191-c cuts both ways

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What to gather, and what a commission lawyer costs

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• Offer letter, commission plan and every amendment

• Commission statements, pay stubs and draw records

• A list of your deals with dates, amounts and status

• Emails about the deals, plan changes and your departure (only documents you are allowed to keep)

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Commission matters are usually billed at $450 an hour under a written engagement letter for individual salespeople and executives as well as companies. Contingency or hybrid fees are offered only as exceptions in special cases. The first consultation is free, and Reza Yassi handles each matter himself.

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Guides on this topic

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• Protecting your commissions: when an employer can, and cannot, claw back or forfeit commissions you earned.

• Broker commission disputes in New York commercial real estate: how licensing, procuring cause and listing terms decide who gets paid.

• The employee choice doctrine in New York: when joining a competitor can cost you unvested deferred pay, and when a firing changes that.

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Frequently asked questions

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Can I sue my employer for unpaid commissions in New York?

Yes. If your employer broke the Labor Law, for example by paying a commission salesperson late or taking back earned commissions, you can recover the unpaid amount, attorney's fees, interest and, unless the employer proves good faith, an equal amount in liquidated damages (Labor Law § 198(1-a)). A contract-only claim, common for executives, recovers the commissions plus interest. If your plan requires arbitration, an arbitrator decides.

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Can an employer refuse to pay commission after termination?

Not on commissions you already earned under the plan; those must be paid. Commissions on deals that close or pay after you leave depend on the agreement, and an at-will employee generally has no right to them unless the agreement provides one. A clause that cancels commissions already earned is not enforced.

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When should sales commissions be paid in New York?

For employees who sell on commission, at least monthly and no later than the last day of the month after the commission is earned (Labor Law § 191(1)(c)). Independent wholesale sales reps must be paid within five business days after a commission is earned (§ 191-b).

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Can I file a Department of Labor complaint for unpaid commissions?

Generally not for sales commissions: the Department's unpaid wages page says it does not accept claims for commissions from sales. The usual route is a demand letter and then a lawsuit or arbitration.

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How long do I have to file an unpaid commission claim?

Six years for a Labor Law wage claim (§ 198(3)) and six years for breach of the commission agreement (CPLR 213(2)). Check your plan for arbitration and notice terms early.

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Do I get double or triple damages for unpaid commissions?

An employee with a Labor Law claim gets liquidated damages equal to 100% of the unpaid commissions unless the employer proves good faith, so the recovery can double. Independent sales reps get double damages for late payment after the contract ends. Triple damages apply only to willful equal-pay violations.

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If your commissions are late, cut or withheld, or your business faces a commission claim, gather the plan and a list of the deals, then contact the firm or call (646) 992-2138 for a free consultation with Reza Yassi.