New York has amended Section 191.1(c) of its Labor Law to require employers to enter into written agreements with commissioned salespersons setting forth in detail the agreed-upon terms of the compensation arrangement. This amendment, which became effective October 16, 2007, was made to combat the difficulties the Department of Labor experienced in investigation of wage payment claims for commissions in the absence of a written agreement memorializing the terms of commission arrangements.

Specifically, the new provision requires employers and commission salespersons to enter into a written agreement, signed by both parties, which describes how wages, salary, drawing account, commissions and all other monies earned and payable shall be calculated. Where the writing provides for a recoverable draw, the frequency of reconciliation shall be included. Such writing shall also provide details pertinent to payment of wages, salary, drawing account, commissions and all other monies earned and payable in case the employment is terminated by either party. The agreement must be kept on file by the employer for a period of not less than three years and made available to the Commissioner upon request. The failure of an employer to produce a written agreement of this type upon request by the Commissioner shall give rise to a presumption that the terms of the employment the commissioned salesperson has presented are the agreed terms of employment.

What This Means for Employers

Employers who fail to prepare detailed written agreements specifying the compensation arrangements they have with commissioned salespersons will proceed at their peril should they end up in a dispute with the commissioned salesperson over compensation owed, whether during or at the end of their employment. Therefore, employers should prepare and require commissioned salespersons to sign written agreements that explicitly spell out key economic terms of their employment. Notably, claims under the Labor Law can be brought by either the Commissioner or the individual on his/her own. A prevailing claimant can recover not only wages owed, but liquidated damages equal to 25 percent of that amount, along with reasonable attorneys fees. Therefore, employers should be careful about detailing the terms of their economic arrangements with commissioned salespersons effective immediately.