Ensuring contracts and agreements reflect when incentive compensation – usually “commissions” – is earned is of paramount importance to New York employers who wish to maximize their rights, as evidenced by a recent decision from New York County Supreme Court Justice Ellen M. Coin.  Sherwin v Mestel & Co. N.Y., LLC, 2014 N.Y. Misc. LEXIS 3055 (N.Y. Sup. Ct. July 8, 2014).

In Sherwin, plaintiff entered into an employment agreement with an attorney placement firm as a recruiter.  Sherwin placed attorneys with law firms on August 16, September 2 and September 5, 2013, but voluntarily resigned on September 3, 2013 before any compensation was due to Defendant for the placements under its client contracts, and before the six-month “guarantee period” set forth in Defendant’s contracts with the law firms had expired.  Because Sherwin’s employment agreement unambiguously stated that “no commission on a particular placement shall be considered earned until the completion of the conditions precedent,” and such conditions included the expiration of the guarantee period and payment by the law firm at which the attorney was placed, Justice Coin ruled no commissions were due to Plaintiff for these placements.  Because Sherwin was not contractually entitled to such payments, they were not “earned wages” within the meaning of New York Labor Law.

Sherwin reinforces the need for (and benefits of) precise drafting of incentive compensation plans.