As we near the end of 2020, there isn’t much that the pandemic has left untouched. It’s wreaked havoc on everything, but it’s also peeled off some tired layers on our workplace onion, in favor or new or different ways of doing business. In some cases, it’s added new problems, new issues, new layers.
Vague commission plans aren’t just old problems or new ones. If your company’s commission plans were silent on key issues or filled with ambiguous terms before, COVID’s unexpected circumstances will add new layers of uncertainty.
Many sales-driven businesses compensate their salespeople in whole or in part on a commission-based model detailed in a commission plan or other written agreement. In Ohio, employers are generally free to structure those plans or agreements as they see fit (so long as they are not violating any applicable wage and hour laws, of course). A salesperson earns a commission according to the terms of the agreement with his or her employer.
But what happens when the terms of the agreement don’t account for (or mention) certain potentialities, like:
- when and how a salesperson earns a commission?
- under what circumstances is a commission reduced?
- under what circumstances are advances suspended?
- what happens during extended absences from active employment?
- what happens during furloughs, layoffs, or reductions in force?
Employers that do not address contingencies in their commission plans, even those that seem unforeseen or unlikely, risk confusion, disputes, and even litigation.
Stephen Zashin, co-managing partner and head of Z&R’s Employment and Labor Groups, says that the pandemic has only highlighted previous shortcomings in commission plans. “Employers should critically analyze their commission plans proactively and not wait for an employee to challenge their wage payments.”
Employers, it’s important to review and update your commission plans to cover the challenges of today and tomorrow. Commission plans are layered, sometimes complex, and if ignored – potentially problematic for all involved.
*Helena Oroz, an OSBA Certified Specialist in Labor and Employment Law, is a member of the firm’s Labor and Employment Groups and regularly advises clients on all employment related matters. If you have some tired commission agreements that need a refresher, please contact Helena (hot@zrlaw.com), Stephen Zashin (ssz@zrlaw.com), or any of Z&R’s Employment Group attorneys at (216) 696-4441.