Employers Must Document Compensation of Commissioned Salespeople to Avoid Pay Disputes

As of October 16, 2007, New York employers must enter into written compensation contracts with salespeople who are paid on commission, or risk an adverse finding on compensation terms in any NYS DOL proceeding. NY CLS Labor § 191(1)(c). Specifi cally,

  • employers must prepare a document showing the terms of the commissioned salesperson’s compensation;
  • the document must describe how wages, salary, drawing account, commissions and all other monies earned and payable will be calculated (if the document provides for a recoverable draw, the frequency of reconciliation must be included);
  • the document must also describe the payment of wages, salary, drawing account, commissions and all other monies earned and payable in the event of termination of employment by either party;
  • the document must be signed by the employer and salesperson; and the document must be kept on fi le by the employer for at least three years and made available upon request to the New York State Department of Labor (“NYS DOL”).

The required document content is limited to compensation matters. The signing of the document by the employer and commissioned salesperson does not change the status of such salespersons who are employed at will. However, it would be prudent to make specific reference in the document to the salesperson’s at-will status.

If an employer fails to produce such documentation upon request of the NYS DOL in connection with any proceeding, the NYS DOL will assume that the terms of compensation alleged by the salesperson are accurate, even if the employer says otherwise.

Salary Threshold Increase for Wage Payment Exemptions Affecting Executive, Administrative or Professional Employees

Currently, “bona fide executive, administrative or professional” employees whose earnings are in excess of $600 per week are excluded from certain of the statute’s wage payment provisions. As of January 14, 2008, the threshold number will increase to $900. NY CLS Labor § 190(7). Consequently, such employees earning less will have to be paid at least semi-monthly, and employers will have to obtain written consent in order to pay them by direct deposit. See NY CLS Labor § 192. This change does not raise the amount that executive, administrative or professional employees must be paid in order to qualify for exemption from New York state overtime requirements (that amount remains $536.10 per week).

New Civil Penalties for Violation of Day of Rest/ Meal Period Requirements

Criminal prosecution has been the only (and rarely used) method of enforcement available to the NYS DOL for violations of section 161 (generally mandating at least one day of rest per week) and section 162 (requiring that certain categories of employees be provided meal breaks). As of January 14, 2008, however, the NYS DOL will also be permitted to seek civil penalties for these violations. NY CLS Labor § 218. Civil penalties for repeat offenders may reach $3,000 per violation. This change will not create any private right of action; the right to seek civil penalties will remain exclusively with the NYS DOL.