New York’s Labor Law requires employers to have written agreements with each commissioned salesperson they employ. Employers who don’t satisfy this requirement could run into serious problems down the road.

Who Is a Commissioned Salesperson?

The New York Labor Law uses the terms “commission salesman,” “commission salesperson,” and “commissioned salesperson” interchangeably. I think the last one sounds best, so I use it here.

The law defines the terms to mean “any employee whose principal activity is the selling of any goods, wares, merchandise, services, real estate, securities, insurance or any article or thing and whose earnings are based in whole or in part on commissions.”

But it specifically excludes employees “whose principal activity is of a supervisory, managerial, executive or administrative nature.”

The New York Labor Law also establishes alternative requirements (not discussed here) for “sales representatives” who are independent contractors rather than employees.

Required Agreements

Employers must have a written agreement with each commissioned salesperson that addresses their compensation.  Both the employer and the commissioned salesperson must sign the agreement. The employer must retain a copy of the agreement for at least three years.

The agreement must include:

• a description of how to calculate wages, salary, drawing account, commissions, and all other money earned and payable;
• the frequency of reconciliation for any recoverable draw; and
• details about payment of compensation earned and payable upon termination of employment by either party.

It is the employer’s burden to ensure that the necessary document is in place. Otherwise, whatever terms the commissioned salesperson says exist will likely become binding.

Payment Frequency

Employers must pay each commissioned salesperson according to the agreed terms of employment.

Generally, this must be at least once per month and by the last day of the month following the month in which the employee earned the compensation. However, if monthly or more frequent payment of wages, salary, drawing accounts, or commissions are substantial, then the employer may pay additional compensation less frequently than once in each month. The employer must always pay at least as soon as required under the compensation agreement.

Upon written request of a commissioned salesperson, an employer must provide a statement of earnings paid or due and unpaid.

Read more about New York’s pay frequency requirements for other categories of employees.

Make Sure You Have Agreements in Place with Each Commissioned Salesperson

Ideally, employers should satisfy these requirements at the time of hire. But you may have employees who change into qualifying roles after they start. Or you might not have put everything in writing. Now is a good time to review your records to make sure you have what you need if there is ever a dispute with a commissioned salesperson over compensation.

Businesses should also periodically review their commissioned salesperson agreements. Do they still reflect the current compensation terms? If not, prepare a new agreement, and get the employee to sign it.

Don’t forget to make sure you’re also complying with the New York Wage Notice Requirements!