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Posts Tagged ‘sales representatives’

Do You Have a Written Post-Termination Commission Agreement? If Not, It Could Be Costly

Posted by Eric Parzianello on September 18, 2014

When commission based employees terminate their employment, do they get commissions for sales made after they leave?  If no contract exists regarding post-termination commissions and the salesperson procured the sales, the employer must pay commissions even after termination of the employee under the procuring cause doctrine.  We recently obtained a significant victory for our client in Oakland County (MI) Circuit Court in large part because his former employer failed to have any written agreement with him regarding commissions.

What is the procuring cause doctrine?  The procuring-cause doctrine applies when the parties have a contract regarding the payment of sales commissions, but the contract is silent regarding the payment of post-termination commissions. The procuring-cause doctrine acts as a default rule for interpreting a contract that is silent with respect to commissions on sales generated by a salesperson before, but consummated after, termination of the relationship between the salesperson and the principal.

An salesperson is entitled to recover a commission whether or not he has personally concluded and completed the sale as long as  his efforts were the procuring cause of the sale.

How is “procuring cause” defined? A procuring cause has been defined by Michigan courts as the “chief means” by which a sale was finally effected. Whether a salesperson was a procuring cause generally turns on the facts of each case making written agreements critical in order to avoid litigating those facts.

Employers and salespersons both should minimize their litigation risk by having written agreements in place before any termination occurs.

Eric Parzianello


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