Jottings By An Employer's Lawyer

Monday, January 12, 2004

Employer Takes (Double) Hit In Commission Case

Even though frequently involving large amounts of money, commissions often are handled rather informally. Frequently, what starts out as a clear agreement muddles through some modifications so in the end not everyone is clear what is supposed to happen. Inevitably, disagreements do. Commission cases can be some of the most difficult to defend as an executive search company found when it was held liable for commissions to an individual who brought a client to the firm. When the client fell out with the employee, but continued to use the firm, the firm didn't do a good enough job of changing the commission scheme. Net result, employee obtains a jury verdict for commissions on the contracts even though he did no work on them, and in fact did not even know about some of them. Smith v. Chase Group, Inc. (8th Cir. 1/12/04) [pdf]. And to add insult to injury, a jury finding that the commissions were willfully not paid resulted in a 100% penalty under a Kansas statute, that the appellate court re-instated.

All in all not a good day for the employer, and a good reminder that keeping tabs on commission agreements and any changes is an important part of doing business.

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