Is this legal?!?

[dyasu]

Here's the scenario:

In 2005 Salesperson "A" sells product "X" on a lease to a business.

Salesperson "A" is given commission for this sale.

In 2008, Salesperson "B" has taken over the account.

In mid-2008 the company that was sold product "X" has gone out of business. This results in loss of revenue for Salesperson "B"s employer, since the remaining lease payments cannot be made.

The loss of revenue is "written off" and product "X" is recovered.

Salesperson "B" (who wasn't even employed at the time of the original sale, and therefore received no commission or compensation for the sale) is then deducted for a calculated portion of the loss in revenue. This number is subtracted from his total revenue sales performance, thus resulting in loss of commission dollars on his next month's paycheck.

------------------------------------------------

So my question is... Is this a legal business practice? Is it legal for an employer to take money out of Salesperson "B"s pocket for a loss in revenue that was uncontrollable (it's not like Salesperson "B" could STOP the customer from going out of business)? Especially considering that he/she never received any compensation for the sale back in 2005?

Any advice (especially from those who are familiar with the law) would be greatly appreciated.

Aloha

[tutusue]

Re: Is this legal?!?

Is salesperson "A" still employed by the company in any capacity?

[dyasu]

Re: Is this legal?!?

In this case yes he is. But he is no longer assigned to the account.

[Frankie's Market]

Re: Is this legal?!?

Wouldn't salesperson "A" then be liable, since he was the one that collected the commission? I'm no legal expert, but that would seem to be the common sense logic.

This logic would apply in the insurance sales business. And it wouldn't matter if an agent still represents the same company or has quit and moved on. If that agent got paid in advance for commission on a policy sold and that policy was cancelled, the agent who collected any unearned commission would have to pay it back. That simple.

I don't know what line of business you are in, but it would hardly make sense for any kind of company to hold a salersperson liable for unpaid commission, when they were never paid for it in the first place. In your scenario, salesperson "B" might have been assigned an existing account for customer service purposes when salesperson "A" has moved on. But I don't see how that makes salesperson "B" liable for the unpaid commission.

If I were salesperson "B", I would definitely question it and not take it sitting down. And it wouldn't matter a whit what salesperson "A" is doing now.

[Menehune Man]

Re: Is this legal?!?

Is this legal?!?

Really doesn't seem so...
but I don't know the legalities.

[matapule]

Re: Is this legal?!?

I have some experience in this area. It all depends on what your employment contract with your employer says. If a salsperson does not have a written employment contract.....you are so SCREWED!

I am unfamiliar with the State Labor laws in Hawaii. Is there a State Labor Commissioners office? If there is, you should go and see them right now. Of course if you do, and your employer gets wind of it, he will find some way to terminate your employment that is not prosecutable.

If the amount of money in question is only a few hundred dollars, my recommendation is to let it go. If you really like your job, my recommendation is to let it go.

If the amount of money in question is in the thousands, you need to seek the counsel of a private attorney who specializes in labor law right now!

To answer your question, it MAY or MAY NOT be legal. Only the Labor Commissioner (if there is one) or a labor attorney can say for sure after reviewing your employment agreement (whether written or not).

Manomonomonuia (Good Luck).

[dyasu]

Re: Is this legal?!?

I think the amount in question is just a few hundred dollars, for this one instance. But in the time he's been employed there he has taken similar "deductions" that were smaller, but there were a lot of them. So in the course of his employment it could be a few thousand dollars worth.

Not only that but this happens to ALL the salespeople, so the collective total would be rather large.

[matapule]

Re: Is this legal?!?

I think the amount in question is just a few hundred dollars, for this one instance. But in the time he's been employed there he has taken similar "deductions" that were smaller, but there were a lot of them. So in the course of his employment it could be a few thousand dollars worth.

Not only that but this happens to ALL the salespeople, so the collective total would be rather large.

First, I want to tell you I'm on your side. Second, I am giving an opinion not legal advice. Third, please don't get mad at me if I don't tell you what you want to hear.

I don't think you have a case. The company has apparently been doing this for a while and you (our your friend) went along with it. Next they have been doing this to all employees and they have gone along with it. So the compensation practice is institutionalized and accepted by the employees over some period of time. If your friend had complained the first time it happened and he was singled out separate from other employees, then he would have a better case.

A company can institute almost any compensation policy that fits within the law. This policy is in a gray area in my opinion. It would be legal if you have a written contract and they detail in that contract how employees are compensated. If there is no written contract but employees know and accept the basis on which commissions are paid and deducted by practice over a period of time, then it is still legal. If the company instituted this policy (which was different from a previous policy) out of the clear blue sky, then those sales people who were effected could resign and sue for any back wages they thought they were owed.

As you can see, it is legally complicated and just one reason why attorneys charge so much. It requires a lot of legal research to even determine if someone has a case.

In my opinion, your friend has three options.

One, forget about it, knowing that he will be paid a commission on something that may be partially deducted in the future from a future saleperson.

Two, quit and go to work for another company that has a commission policy that is more acceptable to him.

Three, spend maybe $25K or more on an attorney to sue the company to get maybe $10K (whatever the amount is) in back compensation......if you are lucky. At that point your friend will be fired and he will be out on the street looking for a job with potential employers knowing that he sued his former employer. Not likely someone would want to hire him knowing that.

Manomonomonuia (Good Luck)

[Amati]

Re: Is this legal?!?

I work in sales, and commissions are a major part of my income. If a company tried to deduct from me a commission that had been paid to ANOTHER salesperson, that would be the same day I'd be seeking employment elsewhere. I would not continue working for a company that basically tried to rip me off.

[timkona]

Re: Is this legal?!?

This is an excellent example of where the "Blistering Telephone" technique would work like a charm.

Sales people, and bureaucrats, are heavily dependent upon their phone, and voicemail.