When Is a Commission Earned?

Under New York law, a commission is earned when the employee completes the substantive work that creates a customer obligation. Courts distinguish between earning a commission and being paid a commission — these are not the same.

The New York Court of Appeals in Pachter v. Bernard Hodes Group, Inc. held that whether a commission is “earned” depends on the terms of the parties' agreement. But no agreement may deprive an employee of wages already earned through completed work.

Important: Courts have sometimes mistakenly treated the employer's receipt of payment as the moment a commission is “earned.” However, if the employee's work generated the revenue, the commission was likely earned before payment was received — and before the employee was terminated.

Statutes to know

• NYLL § 190 defines commissions as wages.
• NYLL § 198 entitles employees to recover unpaid earned wages with interest, liquidated damages, and legal fees.
• NYLL § 193 prohibits forfeiture of earned wages.

Case examples

• Linder v. Innovative Commercial Systems — Employer prevailed based on course of dealing.
• Moore-Haarr v. Z-Axis — Employee lost due to lack of express post-termination terms.