Contracts are critical for good business in New York, and this is no less true for sales representatives. New York law requires companies that use commissioned salespersons to enter into written agreements that specify a number of key terms. If your business uses sales representatives, your understanding of these agreements could prove critical to your interests.
The Manhattan business lawyers of Levy Goldenberg LLP negotiate, draft, and execute sales representation agreements. We also litigate to enforce these agreements and protect the legal rights of businesses. Learn more about the criteria that goes into these important contracts.
The Basic Terms of a Sales Representation Agreement
If your business employs commissioned sales representatives, you need to be aware of your obligations under state law. In New York, employers must prepare a written document for their commissioned salespersons which contains at least the following terms:
- How all money including wages, commissions, drawing accounts, salary, and other forms of payment are to be calculated and paid to the salesperson
- The frequency of payments that are to be made to the salesperson
- How to reconcile the employee’s draw and earned commissions if the agreement provides for a recoverable draw
- Any other relevant payment details, including those that apply when the business relationship terminates
The employer and the salesperson must sign this agreement, and the employer must keep a copy of it on file for at least three years. If a dispute later emerges and the employer cannot produce a copy of the agreement, the New York Department of Labor will presume that the salesperson’s version of it is accurate and will apply.
Common Topics for Litigation
Ideally, the terms of the sales representation agreement should be easy to understand and follow for both parties. In reality, of course, a number of different legal issues could emerge that threaten a lawsuit. Among them are:
- The earning terms of the agreement and whether the salesperson “earned” the commission they are claiming that they are owed
- Whether the employer failed to pay the commission on time, in breach of the agreement
- Whether the deductions that the employer took from the commission are legal
- Whether a payment identified as a “bonus” meets legal criteria
- The salesperson’s draws and whether the employer properly handled them
- Relevant minimum wage and overtime requirements of the Fair Labor Standards Act
- The labor law protections of independent contractor salespersons
Is a Trial Necessary If a Lawsuit Gets Filed?
In the event a lawsuit is filed concerning a sales representation agreement, it is possible that the court will need to hear both parties’ arguments. However, a trial is not a foregone conclusion. Your organization and the salesperson in question have the option of resolving your dispute out of court through mediation.
Mediation is a process by which a neutral third-party mediator helps the parties to a lawsuit discuss and, hopefully, settle their issues without having to proceed to trial. Mediation can save time and money by helping the parties consider the benefits of settlement versus the risks of further court action. Our Manhattan business lawyers can represent your company in mediation to help you better understand your rights and try to reach a mutually beneficial resolution.
Turn to Our Experienced Business Law Team
Sales are essential to many New York businesses, but it’s imperative that employers follow the law and protect their interests with solid, enforceable sales representation agreements. With Levy Goldenberg LLP by your side, your organization can proceed with confidence through all aspects of your relationships with your salespersons. Contact us now to learn more.
