Michigan Sales Representative Commission Act – What Employers Need to Know

We have previously written blogs about how the Michigan Sales Representative Commission Act and the Procuring Cause Doctrine can help to level the bargaining power between a terminated commissions employee and their ex-employer.  Is there anything that an employer can do to take the power back?  Knowing that these laws exist is a good first step, but establishing solid business practices can avoid exposure altogether.

DRAFT SOLID CONTRACTS: The first thing that any employer considering hiring an employee should do is reduce their agreement to writing.  Having predictable outcomes to employment issues not only puts the parties at ease but also cuts down on the need for expensive litigation when things go wrong.  In light of the Michigan Sales Representative Commission Act and Procuring Cause Doctrine any commission-based employment contract must be carefully drafted.  How commissions are earned should be specifically set out, when payment of commissions is due should be clear and how post-termination commissions will be paid should also be outlined.  Essentially, an employer should be able to come up with a hypothetical based on their business practices and immediately know what is due, to whom, and when.

STICK TO YOUR CONTRACTS: If you set out specific terms in your contract outlining what commissions will be paid, when, and to whom, stick to those terms.  The penalty provisions in the Michigan Sales Representative Commission Act (up to $100k plus attorneys fees) give an employer ample reason to pay commissions when they come due.  If a disagreement arises with an employee, deal with it, do not just sweep it under the rug and hope it goes away.

CONSIDER A SEVERANCE PACKAGE: Chances are, if a relationship is being terminated, neither side wants to drag out the break-up.  Even when a valid contract exists, the Procuring Cause Doctrine can make a determination of what commissions are due following termination a gray area.  Gray areas are areas that we attorneys know are ripe for litigation.  This means that if both sides are not satisfied with what is owed and when, the break-up of employer/employee may drag on for months or even years.  Both sides should see the value negotiating terms of a fair severance package to prevent this from happening.  Finding neutral ground that settles all issues related to potential or real future commissions is typically in the best interest of both parties.

If your business is considering hiring commission-based employees or already utilizes their services, let us sit down with you and make sure that you are doing everything that you can in the off-chance that the relationship sours.  Let The Law Office of Mattias Johnson create a predictable plan for your business so you can go about selling your goods or services without fear. 

(For other drafting tips and considerations see our blogs on Non-Competition Agreements, Non-Solicitation Agreements, and At-Will Employment)