Sales Commission Disputes

Sales Commission Dispute Lawyer in Chicago and Illinois

Many businesses motivate their salespeople through commissions. In a commission-based compensation system, salespeople collect a percentage of their sales or the business’ profits as part of their compensation, and they make more money if they successfully make more sales.

Claims Based on Sales Commissions

Sometimes, businesses don’t pay salespeople the commissions they have earned and are owed or pay less than they owe. Some businesses use unfair practices such as terminating a sales contract simply to avoid paying commissions.

When that happens, an attorney with experience with sales commission conflicts can help them get what they are owed.

Illinois Sales Representative Act (ISRA)

Sales commission disputes in Illinois are usually governed by the Illinois Sales Representative Act (ISRA), 820 ILCS 120. The act has a number of provisions to help make sure that salespeople get paid the commissions they are owed and to deter businesses from using unfair practices to avoid paying their salespeople. The law was designed as a corollary to the Illinois Wage Payment and Collection Act (IWPCA), and it is supposed to be interpreted to protect sales representatives who would be protected under IWPCA, but are not because of their independent contractor status.

Business Entities Subject to the IRSA

A “principal” under this law can include a sole proprietor, partnership, corporation, or any other business entity that manufactures or distributes a product for sale, contracts with salespeople to solicit orders for a product, and compensates the salesperson, partly or entirely by commission.

Definition of Sales Representative

A “sales representative” under ISRA is somebody who contracts with the principal to solicit orders for the product and is paid in part or totally by commission. The definition excludes, however, a person who:

  • Places orders for his or her own account in order to resell the product, or
  • A person who is considered the principal’s employee under the IWPCA.

Contractual Terms for Timing of Commission Payments

ISRA provides that the contractual terms between a principal and salesperson are controlling when it comes to the timing of commission payments. However, if there is no contract that sets forth the timing, then past practice shall control. If there is neither past practice nor a contract, the Illinois custom and usage for payments in the industry controls the timing.

Termination of Sales Contract

What if the principal terminates the sales contract? In that case, ISRA provides that the commissions due at the time of termination must be paid within 13 days of the termination. Any commissions due after the termination are owed within 13 days of the date when the commissions become due. This rule cannot be waived in the contract between the principal and the salesperson.

Failure to Make Timely Commission Payments

When a principal fails to make timely commission payments or terminates the contract without abiding by the rules regarding timely payment, it can be sued in civil court. Exemplary damages, attorneys’ fees, and costs cannot be recovered under common law for breach of contract, but they are specifically addressed by ISRA. A successful sales representative can recover not only the amounts that are due, but also exemplary damages that are not more than three times the amounts still due. It should be noted that, as a practical matter, Illinois courts usually award exemplary damages only when there is a finding of culpability, in spite of the mandatory language of the statute. The principal is also required to pay the sales representative his or her attorney’s fees and costs.

Discuss a Sales Commission Dispute with a Chicago, Illinois Attorney

Let an experienced sales commission dispute lawyer from Voelker Litigation Group help you get what you are owed for your hard work.

Voelker Litigation Group: Honest treatment, clear advice, smart strategies.