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ORANGE COUNTY SHOPTALK

Firm Can Change Commission Payments

March 18, 2001

Q Our company has been paying commissions to our sales personnel based on invoiced sales rather than payments received. We would like to switch to the latter.

Can a company simply establish a policy that commissions are paid when payment is received from our customers?

--D.C., Marina del Rey

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A Absolutely. You can provide that commissions will not be deemed earned until payment is received from the customer.

Many employers have such a policy to avoid paying commissions on revenue that is never received. The only limitation is that you cannot change a commission plan with respect to sales already made; you can apply the new policy only to future sales.

You must also notify all employees about the policy in writing.

--James J. McDonald Jr.

Attorney, Fisher & Phillips LLP

Labor law instructor, UC Irvine

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