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VIC Legal for Company to Withhold Part of Sales Commission?

Discussion in 'Employment Law Forum' started by James Streeter, 25 September 2016.

  1. James Streeter

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    General workplace agreement query: Is it legal for a company to not pay 100% of employee sales commissions on termination of employment?

    Due to the nature of the industry, commissions are only payable upon construction commencement (Site Start) which is often 12-18 month after a sale takes place. The below extract is a clause from an employment contract offered with a building construction company.

    I’ve search the fair work website, but am unable to find anything specifically relating to workplace agreements and commissions paid. Under this agreement, a sales employee will never receive full sales commission payment upon resignation/retirement. Can this be legal?

    Any help would be appreciated.

    —————————————————————————

    4. Remuuneration

    4.1 Annual Salary

    Your annual gross salary is set out in Schedule 1 item 5 of this Agreement and will be paid monthly less tax into your nominated bank account by electronic funds transfer.

    4.2 Commission

    . 4.2.1 In addition to your annual salary as specified in clause 4.1 and subject to clause 4.2.2, the Company will pay a commission of $1,000.00 plus superannuation to you on a duly executed RIA Building Contract. Any commission payable is conditional upon construction works commencing, and the commission will be paid by the Company upon construction works commence on the property ("Site Start").

    . 4.2.2 If your employment is terminated for whatever reason, then the commission payable by the Company to you is as follows:- 
a) If a BIA Building Contract has been duly executed before your employment is terminated but construction works have not commenced then the Company will pay $500.00 as commission to you which is payable at Site Start.

    
For clarity, this means that if a RIA Building Contract was signed by both parties before your employment was terminated but construction works had not commenced, you would only be entitled to commission of $500.00, as commission is conditional upon the building works commencing.

    The reduced commission will be paid at Site Start.

    
b) No commission payable for any unsigned Contract at the time your employment is terminated 

     
  2. Rod

    Rod Well-Known Member

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    Seems OK to me and you agreed to the contract.
     
  3. Matthew Lynch

    Matthew Lynch Lawyer

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    Hi James

    It is possible that a clause of that type in a contract would amount to a penalty clause. It is penalising you for the contract terminating. It appears to be a deduction from the normal rate of commission payable by half of that commission if the employment is terminated for any reason - even if it is terminated at the initiative of the employer.

    Clauses such as this are only valid if they are liquidated damages clauses that genuinely pre-estimate the loss the employer suffers from the breach of contract or other event occurring. It doesn't appear that there is any loss to the employer in this scenario. An example of a valid liquidated damages clause would be one where you are required to give notice or pay an amount in lieu of giving notice.

    How long have you been working there? Are you currently terminated?
     
    James Streeter likes this.
  4. Rod

    Rod Well-Known Member

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    It would be relatively easy to claim the clause is not a penalty. The employer may claim that contracts post signing and after employee termination require intervention by another sales person to deal with contract variations and queries (ie cost to employer). Though needs additional facts to ascertain which situation applies. If I was the employer I'd be feeling comfortable defending the contract :)

    Not sure how much money is at stake and may not be worth it to engage a lawyer.
     
  5. Matthew Lynch

    Matthew Lynch Lawyer

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    The difficulty is that the loss you are referring to "intervention by another sales person to deal with contract variations and queries" is an expected part of an employment relationship (turnover) and in any event is usually dealt with by way of a notice of termination clause.

    You could also argue the employer is being unjustly enriched by the difference between the amount paid and the amount that would normally be payable. Your employer is receiving a windfall at your expense.
     
  6. James Streeter

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    Thank you for the replies to my query. Appreciate your feedback greatly @MatthewL :)

    I have perused a few different contracts over the last couple of weeks, and there seems to be varying degrees of restrictions / penalty clauses in each being considered. They seem somewhat unnecessary, and from the feedback here it would seem unnecessary contract restrictions / penalties can be challenged... should it come to that.

    Anyway, in reference to the workplace agreement in the initial post, the summary of the clause would be - consider earning 50% commission is the norm... should anyone join an organisation agreeing to that particular clause of the agreement.
     

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