When is a sales commission earned in New York?

What is the rule?

New York answers the question in three steps. First, the time stated in your agreement. Second, if the agreement is silent, how the company actually paid commissions over time: the Court of Appeals holds that the agreement can be “express or implied,” and an implied agreement can be shown by past practice. Third, if there is no agreement at all on the point, a commission is earned when the salesperson produces a buyer ready, willing and able to buy (Pachter). The Department of Labor applies the same three steps (Department of Labor, Payment of Commissions FAQ). You do not need a written plan to earn a commission, even though the law requires the employer to give you one. The exception is a promise to keep paying you on an account for as long as it keeps ordering after you leave; that promise has to be in writing (Zupan v Blumberg, 2 N.Y.2d 547, 550 (1957)).

What does "ready, willing and able" mean in practice?

That the selling is done. The salesperson’s job, as the Court of Appeals put it long ago, is “to bring the buyer and seller to an agreement” (Sibbald, 83 N.Y. at 381). In Pachter the Court weighed three possible earning points — the client’s commitment to buy, the company’s payment to its vendor, and the client’s receipt of an invoice — and held the first “most consistent with the common-law ‘ready, willing and able buyer’ rule” (10 N.Y.3d at 618). So under the default rule a commission can be earned before the sale is consummated. The processing, invoicing and collection that follow do not change when you earned it.

Can my plan set a later earning point?

Yes, if it says so. A plan can make a commission earned only when the customer pays, or can calculate it after costs or returns are netted out, and courts enforce those terms (Pachter; Cohan). A company’s consistent practice can do the same thing: in Linder a salesman who for years had received commission statements showing payment only when customers paid lost commissions on payments that arrived after he left.

Two limits protect you. First, an unclear plan is read against the company that wrote it. Had the employer “meant to foreclose” the commission, it “could have said so explicitly” (Yudell; Arbeeny). Second, a plan can decide when a commission is earned, but once it is earned the plan cannot take it away. New York’s “long standing policy against the forfeiture of earned wages . . . applies to earned, uncollected commissions as well” (Weiner). A clause requiring you to be employed on the payment date cannot cancel a commission you had already earned (Arbeeny; Zia-Ul-Haq).

The later event has to be about the sale, not about you. A plan cannot make your still being employed the condition (Zia-Ul-Haq; Arbeeny), and a firing “specifically designed to cut off commissions that were coming due” is its own claim (Arbeeny, quoting Wakefield). The harder case is when the sales work is done and the event the plan names — the closing, the delivery, the customer’s payment — happens after you leave. The same appellate court has come out both ways. It reinstated Labor Law claims for commissions on placements a recruiter had “arranged” before he was fired and that were completed afterward, reading the agreement against the employer that wrote it (Arbeeny). Five years later it held that a salesman was not owed commissions on customer payments that arrived after he left, because seven years of commission statements showed he was paid only when customers paid and nothing provided for commissions after termination (Linder). The difference was what the agreement, written or shown by practice, made the earning event. Our view: where the plan ties the commission to your sales work, or leaves the point unclear, Arbeeny is the better guide, and a commission you sold should not be lost because the paperwork finished after you were gone.

Once it is earned, when must it be paid?

At least monthly, and no later than the last day of the month after the month in which it was earned (Labor Law § 191(1)(c)). A commission earned in February is due by March 31. There is a narrow exception for extra or incentive pay, and you can ask in writing for a statement of what you are owed. See When must my commissions be paid?

What if I am an independent sales rep?

Different rules apply. For a wholesale sales representative whose contract is silent, a commission is earned on merchandise that has been “delivered to, accepted by, and paid for by the customer” (§ 191-a), and earned commissions are due within five business days after the contract ends (§ 191-c). Many pages online apply those rules to employees, but they do not govern an employee’s commissions. If you are paid on a 1099, start with the 1099 guide, including whether you are really an independent contractor at all.

What should I do now?

Write down, deal by deal, what you did and when: the lead, the quote, the signed agreement, any deposit. Find the sentence in your plan, if there is one, that says when a commission is earned. Collect your commission statements, because how the company actually paid is evidence of the terms. Then read the full W-2 guide, which covers chargebacks, draws, plan changes, leaving the job and what you can recover.