On September 5, 2018, board-certified employment attorney Kerry O’Brien participated as the “employee lawyer’s perspective” for the “Who is the client?” presentation to the Austin Bar Association Labor & Employment Section. The panel discussion with Kerry and three employer-side attorneys discussed the ethical considerations involved in determining when someone is, and is not, a “client.” […]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 king. 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.
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? 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.
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. 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.
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, but you don’t know until you’ve had your situation evaluated by a professional. Don’t lose thousands of dollars that you earned by making assumptions about your rights that may not be correct.
Should I file a Wage Claim with the Texas Workforce Commission?
Boy, that really depends on the situation. The O’Brien Law Firm cannot, as a hard-and-fast rule, take on bonus or commission cases (if that is the client’s only claim) that are below $5,000. The economics for both the law firm and the client tend to not make sense. If you cannot find another employment attorney to assist you on that, then maybe a TWC Wage Claim is for you. It’s free.
At the same time, the TWC makes wage claim decisions using the Texas Payday Act and regulations that have been added to that law. These are different from the laws and standards used by Texas courts to make decisions in these types of 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.
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. 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, set up a FREE phone consultation 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 a two-day trial to the bench on September 11-12, 2017, the O’Brien Law Firm presented its client’s case in a federal trial to the bench in Civil Action No. 4:16-cv-00415, in the Southern District of Texas – Houston Division. The defendants are the legal entities and owners for a chain of car stereo retail stores […]Read More