Recently, New York Labor Law § 191(c) was amended to impose new requirements on employers of commissioned salespersons. Specifically, effective Oct.ober 16, 2007, any employer who employs an employee who earns commissions must:

  • Reduce the commissioned salesperson’s terms of employment to writing (whether in the form of an executed term sheet, an informal letter agreement, or a more formal employment agreement);
  • Ensure that the written agreement is signed by both the employer and employee; and
  • Keep the written agreement on file for a period of not less than three (3) years, and make the agreement available to the Commissioner of the New York State

Department of Labor upon request.

The amended law also provides the following specifications with regard to what terms must be included in the written agreement:

  • The agreement must include a description of how wages, salary, drawing account, commissions and all other monies earned and payable shall be calculated;
  • If the terms of employment provide for a recoverable draw, the agreement must provide for the frequency of reconciliation; and
  • The agreement must include details regarding the payment of wages, salary, drawing account, commissions and all other monies earned and payable in case of termination of employment by either party.

In the event an employer of commissioned salespersons fails to meet any of the above requirements, and the Commissioner of the New York State Department of Labor requests such a document in response to a claim being filed, the revised law provides that there will be “a presumption that the terms of employment that the commissioned salesperson has presented are the agreed terms of employment.” N.Y. Labor Law § 191(c). This means that if a disgruntled employee files a claim with the New York State Department of Labor claiming that the employee was not paid all earned salary/commissions, and misrepresents to the Commissioner the amounts at issue or the percent commissions to which the employee is entitled, the Commissioner will presume that the employee’s statements are accurate in the absence of the employer’s production of a signed written document comporting with the requirements of New York Labor Law § 191(c). As you might imagine, an employer’s failure to comply with § 191(c) could prove to be quite costly.

Employer’s should also be aware that the requirement imposed by the amended New York Labor Law § 191(c) to reduce the terms of employment for a commissioned salesperson to writing does not change the commissioned salesperson’s at-will employment status. In fact, an express statement of the commissioned salesperson’s at-will employment status should be included in the agreement (see the first bullet, above). Employers should view the new requirement as a mandate to memorialize in writing the existing terms of a commissioned salesperson’s employment, and not as a mandate to enter into a new employment contract with commissioned salespersons.

While the burden of the amendment is placed squarely on the employer, it appears that in enacting this amendment, the New York Legislature was attempting to protect employers against fraudulent wage claims while at the same time protecting employees by ensuring they get what is truly due owed to them.