In February 2022, just before a sales representative and his former employer were about to start a jury trial over his claim of over $200K in unpaid sales commissions, the parties settled the dispute on confidential terms. In that case, Cause No. 19-E-0107 in the 130th Judicial District Court of Matagorda County, the sales rep […]Read More
There’s a good chance that you’re here because an employer is refusing to pay you a commission or bonus that you believe you’ve earned. Do they have to pay you? In Texas, it really depends on the situation. Sometimes yes, and sometimes no. Let’s talk about what factors are important for determining if you can get paid what you’ve worked for.
The terms “commission” and “bonus” are sometimes used interchangeably by people. The specific word used isn’t important – ultimately, it’s money that in most cases you are being paid due to your performance. When we talk about “commissions” on this page – we’re referring to money due to you for each individual sale or transaction you executed as an employee. At the same time, when we talk about a “bonus,” we’re referring to a lump sum amount of money paid to you at end of a certain period – sometimes quarterly, annually or by some other time frame. Bonuses can be based on your performance, based on the company’s performance, a mixture of both or some other factors.
In Texas, having your commission or bonus compensation plan in writing is the best situation. It can be a significant factor in determining whether you’ll be able to make the employer pay. Having it in writing, of course, can remove any doubt as to what the terms are for payment of the commission or bonus.
If your commission or bonus plan is in an offer letter, you can read more about offer letters here.
Disputes even when the plan is in writing can depend on:
1) The timing of when you actually earn the commission or bonus.
Does payment of a bonus require that you be employed through a certain eligibility date to receive it? Does a commission require that you complete a sale through a final closing to earn it?
Some Texas cases require that the employer pay you a pro rata share of a commission or bonus under certain circumstances. The Texas Payday Law – the law used only by the TWC when handling wage claims – will normally deny the employee the bonus if they aren’t still employed when the bonus amount is determined – unless a written agreement specifically says to the contrary. Meaning, potentially, your company could fire you on December 30 to avoid paying you a healthy annual bonus due December 31, and the TWC may support the employer’s right to do so and deny you the bonus. (We talk more about filing TWC Wage Claims below.)
2) The specificity of the language.
If the language used by the bonus agreement gives the employer discretion to determine the amount of the bonus, that can work against you.
For instance, language that says “The company may award employee up to 5% of employee’s gross annual salary as a bonus, based on the company’s appraisal of employee’s performance through December 31 of each year” may require the company to pay you some bonus if you inarguably had a good year, but may leave the amount of the bonus significantly within the hands of the employer. And in some cases, the employer may not be required to pay you any bonus at all.
However, when the language is simply vague or unclear, Texas law will normally interpret the lack of clarity against the side that drafted the agreement – almost always the employer.
For instance, if the agreement says that the employee will be paid a bonus “every year,” that language is vague. Is that based on the employee’s hiring date anniversary, or a calendar year? Or perhaps the company’s fiscal year, if it doesn’t run with the calendar year? It’s vague, and Texas law recognizes that it’s the employer’s fault for drafting it that way – and therefore the employer’s problem. So if the employee works 13 months, from October 1 through November 1 of the following year, a court is more likely to interpret “year” in the employee’s favor and grant them entitlement to that “annual” bonus using the anniversary of their hire date to determine the “annual” period. And that’s because the employer failed to make it clear when they drafted the comp plan.
So again – it depends.
3) Whether there is anything in the agreement that denies the employee a bonus for being terminated “for cause.”
These “for cause” or “good cause” provisions are more often written into higher-level executive contracts. However, they can be subject to substantial legal disputes when the company releases the employee or executive for a questionable reason.
Agreement not in writing?
Of course, talk to an employment attorney. An oral agreement in Texas can be enforceable. Whether the employer still has to pay you the commission or bonus based on a verbal promise or agreement depends on many factors that should be evaluated by a Texas-board-certified employee’s rights attorney. It’s not just about your legal right to the bonus or commission but the best strategy to getting you paid.
If you can demonstrate a history (say, in your pay stubs) of the employer paying you a certain commission, that can help corroborate that conversation that you and the employer had at the beginning of your employment.
If you remain unpaid on work that you took all the way through closing while an employee, that can help.
Commissions are normally more likely to be enforceable because they are your compensation for specific work. Bonus agreements not in writing are subject to a lot more discretion and ways for the employer to get out of liability to pay it.
It just depends on the facts and circumstances. It is certainly inherently harder to enforce an oral commission or bonus agreement simply because “he-said-she-said”, but you don’t know until you’ve had your situation evaluated by an experience legal professional. Don’t lose thousands of dollars that you earned by making assumptions about your rights that may not be accurate.
Should I file a Wage Claim with the Texas Workforce Commission?
Boy, that really depends on the situation. We have a more extensive write up on TWC Wage Claims here.
Keep in mind that as a practical matter, the less money you’re owed, the less likely you’re going to find an attorney who can handle the case on contingency – meaning, for just a percentage of the amount, with no payments out-of-pocket by you. (“Contingency” is a word that lawyers use instead of “commission,” for some reason, even though they are essentially the same thing.) However, if an attorney wants you to pay them hourly, that can turn into a money pit very quickly if you’re not owed a relatively larger amount of money.
At the same time, the TWC makes wage claim decisions using a law called the Texas Payday Act and regulations that have been added to that law. These can be different from the laws and standards used by Texas courts to make decisions in these same types of “breach of contract” cases. And the laws the TWC uses to decide these cases can be 180 degrees different than what a Texas court is likely to do. No doubt, tons of Texas employees have lost a lot of money going through a TWC Wage Claim process on a commission or bonus because the TWC uses what, to an employee’s attorney, can be kooky and non-sensical reasoning.
Here’s an example: A sales employee is paid on a commission-only basis. The agreement is that he is paid when the customer makes payment. This makes sense – the employer needs the cash flow to come in to pay the employee, and the employee is fine with that. Before he quits, he completes a number of sales. The only step left is for the customers to make payment. The employer refuses to pay him when the employer got paid – because they said he wasn’t an employee when the money came in.
To a Texas court, the response is likely to be “No. You need to pay him. Seriously. He did all of the work. He expected to be paid, and you knew he expected to be paid. You accepted the benefits of his work. The law says he has a right to payment for his work.” But on these facts, the TWC actually said “Since the agreement was to pay him when the money came in, and he wasn’t an employee when the money came in, no payment is due.” It’s a stupid result. Fortunately, this client reached out to our firm, and we got the claim out of the TWC Wage Claim process and before a Texas court to work toward a more just and fair result.
As an aside – if the employer is refusing to pay a modest final paycheck, or is refusing to pay the cash equivalent of your vacation pay or sick pay (and the employer has a written agreement or written policy stating that they will pay out the cash equivalent of the unused leave when you leave the company), a TWC Wage Claim may be appropriate for you.
Small Claims Court at your local Justice of the Peace
Keep in mind as well that an individual can file a case for up to $20,000 in money damages with a Justice of the Peace Court, without the need for an attorney. It’s a relatively inexpensive fee, and the JP Court typically has a form you can fill out. That’s another option for individuals as well. However, we can’t say that a TWC Wage Claim, JP court, or a lawsuit with an attorney, is the best option for you in your particular situation without knowing more details, because every situation is different.
Where to go from here?
So if you have an unpaid commission or bonus, contact the O’Brien Law Firm – and Kerry O’Brien, an Austin and Dallas Texas-board-certified employment attorney – so that we can help evaluate whether you are more likely to get paid, and paid more, through working with our law firm rather than handling a TWC wage claim yourself. And sometimes we take on a case and use the TWC wage claim process as one strategic tool toward helping you get paid in full There are even other options – it’s all about using our experience, lawyer leverage and strategic thinking to figure out the best option for you and your particular situation. And, sometimes, we discover that you are entitled to more money than you realized. That’s always a real bonus for us that we love to be able to make happen.
If you believe that you have been wrongly denied commissions or bonuses from a current or past employer (within the last 4 years normally), call the O’Brien Law Firm NOW at (512) 410-1960 to set up a free confidential case review or fill out the form below so that we can get to know you and your situation. Your information is confidential and the form submission goes directly to attorney Kerry O’Brien for his review.
In August 2021, the O’Brien Law Firm took on a case where the firm’s client had already filed a Texas Workforce Commission wage claim that the TWC had 98% denied. Before the client’s TWC wage claim appeal hearing, the client reached out to the O’Brien Law Firm to take on the case at that point. […]Read More