Companies in Texas that pay sales commissions should check their written policies regarding draw-on-commission pay. The U.S. Court of Appeals for the 6th Circuit has sided with employees in a case that challenged an employer’s policy that required employees to repay draws made upon future commissions if they left their jobs.
Draw-on-commission pay describes the practice of paying commission-only sales staff from future week’s commissions if their current earnings do not amount to minimum wage. In the case before the 6th Circuit, an appliance retailer had a written policy requiring employees who quit to repay any draws on commission advanced to them prior to quitting. A lower district court had sided with the company because the plaintiffs had not offered any evidence that anyone had actually been made to return compensation to the employer.
On appeal, however, the court found that the written policy could impose on people the belief that they owed a debt. This could cause them to declare the liability on various financial applications or alter how they saved or spent money. Additionally, the appeals court determined that wage and hour laws required people to receive their minimum wages without any obligations to return the money to an employer.
When a person working for sales commissions does not have a clear understanding of how wage and hour laws apply to the situation, an attorney may provide clarification. An attorney might review the payroll records and the employer’s policy to see if they appear to comply with the Fair Labor Standards Act. When they do not, an attorney may be able to assist the person with filing a complaint and requesting back pay. When necessary, they may file a lawsuit that could compel an employer to answer the person’s complaint in court.