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Did you know? Sales Commissions are Protected like Wages in Connecticut for Some Reps!

Commissioned sales worker - 6-18-15

Under Connecticut law, wages enjoy special protection.  Conn. Gen. Stat. sec. 31-58 et seq. entitle an employee who has not been paid his or her full wage (i.e., minimum wage, and overtime of non-exempt) to attorneys’ fees if successful and double damages in some cases.  The purpose of this law is to prevent employers from taking advantage of the employees who rely on them for their livelihood.

Note the term “employee” above.  People often think that protection of this type only applies to employees and not to independent contractors, but this is not the case in Connecticut.  In fact, Sales Representatives, who are often independent contractors, are protected by state law, even though they are paid on a commission basis and not a wage basis.

Conn. Gen. Stat. sec. 42-481 et seq.  provides that upon the termination of an agreement between a sales representative and principal, the principal must pay out all commissions due before, on, or after the date of the termination within 30 days or the date specified in the contract.  For example, if a sales rep and a manufacturer with whom the rep has a contract is terminated on July 1, the manufacturer has to look at the commissions due to the rep “in the pipeline” as of July 1.  The manufacturer cannot say that because the rep will not have a contract in place on the date that the goods he sold are actually paid for, he does not get his commission on those goods.  The manufacturer thus has 30 days- or a longer period if the contract allows- to pay the rep his or her commissions.

Further, this statute provides that the principal has to pay the attorneys’ fees of the rep if he or she is successful in making his or her claim, and that if the principal’s conduct was “willful, wanton, reckless, or in bad faith” it has to pay double the amount due.

Sometimes, companies think that they can get away with cheating sales reps out of commissions by terminating their contract before all of the work that the reps have done pays off.  They may think that because their reps have independent contractor status, they won’t be protected by law the way employees are.  This is false- the law protects the hard work of these sales reps and sets a tough standard for companies that attempt to act unfairly by claiming that commissions aren’t payable because they terminated the contract before the sums were paid in.