Disputes over commission and bonus payments are among the most daunting challenges that arise between businesses and their employees or contractors. They are usually the result of miscommunication, though they are occasionally related to financial struggles or disputes over performance.
The most common issues surrounding unpaid commissions or bonuses include:
- Disagreements on the terms, targets, or conditions that are being used to justify non-payment. These disagreements most frequently arise from the original terms of the agreement being unclear.
- When commissions or bonuses are delayed by financial issues or cash flow problems, it can leave employees or contractors dissatisfied, angry, and uncertain,
- Vague language regarding how commissions and bonuses are structured or calculated can lead to disappointment and disagreements.
- Revising commission structures, especially when it’s done retroactively, or delaying bonus payment after work has been completed leads to significant animosity and potential legal action.
Beyond these examples, there is an entirely separate issue that arises when a business misclassifies employees as contractors to avoid paying commissions, bonuses, or other compensation. This can create legal problems that go beyond the employer’s relationship with the individual and lead to involvement from government entities, including the IRS.
When faced with these situations, your business has a few options. The first step is to review the existing agreement for language involving commission and bonus payments. Focus on terms regarding timeline, calculation, conditions, and procedures for addressing disputes. The language that’s incorporated into the agreement may support your position.
If your informal discussions don’t resolve the issue, it’s a good idea to involve your attorney early in the process so that they can ensure that you protect yourself against unfair demands and minimize the risk of litigation. In preparation for these discussions, be sure to gather all communications and contracts regarding compensation and performance to assist in your defense.
The best way to prevent this type of problem from occurring is to have clearly written agreements in place. For assistance with employment issues, contact us today.
