Legal Rights Knowledge Base

Sales commissions under NY law

New York Labor Law provides strong wage protections, but the rules regarding sales commissions can be complex. A key issue is distinguishing between:

• When a commission is "earned" – when the employee has completed the necessary work.
• When a commission must be "paid" – which may depend on the employer receiving payment from a customer.

The New York Court of Appeals clarified in Pachter v. Bernard Hodes Group, Inc. that commission agreements define when commissions are considered earned. However, courts have struggled with situations where employees are terminated before receiving commissions.

When is a commission earned?

Under New York law, a commission is earned when the employee has completed all substantial work necessary to create the employer's right to receive payment.

• If the employer's right to revenue is secured by the employee's work, the commission should be considered earned.
• If only administrative steps remain, the employee should not forfeit commissions due to delays beyond their control.

A common legal issue arises when employers require continued employment as a condition for earning commissions. However, under NYLL § 193, employers cannot impose unlawful wage deductions or conditions that result in the forfeiture of earned wages.

Post-termination commission rights

If you were fired after closing a sale, when your commission is paid depends on:

• Whether your commission was earned before termination.
• Whether the employer received payment from the customer.

Key cases:

• Linder v. Innovative Commercial Systems (2015) ruled that without an express agreement, commissions may be denied if they were historically only paid upon receipt of customer payment.
• Moore–Haarr v. Z-Axis, Inc. (2016) ruled similarly but clarified that past practices and agreements matter.

Commission plan changes

New York law allows prospective changes to commission plans but prohibits retroactive changes that would deny payment for already-earned commissions.

• Employers must provide written notice under NYLL § 195 before modifying commission structures.
• Earned commissions remain protected and cannot be taken away after the fact.
• Employers cannot impose new conditions retroactively to avoid paying commissions.

Cases discussed

• Pachter v. Bernard Hodes Group – The leading case defining when commissions are earned.
• Linder v. Innovative Commercial Systems – A case denying post-termination commissions based on employer practices.
• Moore–Haarr v. Z-Axis, Inc. – Further clarifies when commissions are earned vs. paid.
• Jobar Holding Corp. v. Halio – Application of faithless servant doctrine to wage cases.
• Naderi v. North Shore–LIJ – Limits wage claims for high earners under NYLL § 198-c.

Need legal assistance?

If you believe your employer has withheld commissions or violated wage laws, contact me for a consultation.