Regardless of whether an employee is non-exempt or exempt, commission payments generally make up part of the compensation for a sales employee. Federal and state laws do not require that a commission be paid for sales made by an individual, but employers often use commission payments to incentivize employee productivity. A commission may be paid in addition to an hourly or salary wage, or can be the sole form of compensation.
Commission plans should generally always be agreed upon in writing, and a written commission agreement signed by the employee is a requirement in several states. By having the commission agreement in writing, both the employer and employee have clear expectations of what is required to earn compensation and the overall payment scheme. Employers can reserve the right to make periodic changes to the commission plan, so long as those changes do not impact payments made on commissions earned under the earlier agreement.
Commission payments also must be paid within a specific time frame after being earned. For example, in California, all wages, including commissions, must be paid at least twice during a calendar month. Having a clear definition of when commissions are “earned” in the written commission plan will help determine in which pay period the commission payment will be paid.
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Lastly, employees who are paid in part or in full on commission must be paid in accordance with their non-exempt or exempt status. Commission payments can be counted toward minimum salary requirements in certain circumstances, but employees must still be paid in accordance with minimum wage and overtime rules. In the event of a dispute about unpaid commissions or unpaid overtime can result in significant penalties, so it is best to be cautious and carefully track payments for commissioned employees.
Sales employees often spend most of their time outside of the employer’s business and will therefore incur common business-related expenses such as mileage, cell phone or telephone charges and business lunches. State laws generally require an employer to reimburse these business-related expenses.Employers may therefore choose to provide a company vehicle, company cell phone, company laptop, and/or company credit card to members of the sales team. This is beneficial not only for tracking expenses, but ensures that all data about sales contacts and related information is retained by the company when members of the sales team depart the company.
If company equipment is provided, the employer should have clear policies in writing about use of the equipment and its return upon employee termination. If the employee will be using his or her own equipment, the employer should also have clear policies about how contact and account information is returned to the company and retained on employee-owned devices upon termination of employment.
Employers in the brewing industry often have to confront how to encourage responsible employee behavior, both during work hours and when off the clock. This can be particularly important for employees who spend most of their time working outside of the office, representing the business without any direct managerial oversight. Regulating work conduct can be accomplished through comprehensive alcohol and drug use policies, harassment policies and clear job descriptions, but regulating off the clock employee behavior can be a delicate balancing act between the employer’s interest in protecting its image and brand and the employee’s right of self-expression.
All employees, including members of the sales team, need to have clear policies in place about representation of the company. Sales team employees should never represent themselves on social media as representatives of the brewing without explicit permission, and should never “check in” or identify themselves as being at a client or customer site during work hours. State laws generally are protective of an employee being able to make lawful lifestyle choices without fear of termination, so care should be taken in drafting policies that govern what an employee can do on and off the clock.
Confidentiality and intellectual property
Members of the sales team are going to be the community face of the business and will have access to information about the brewery’s customers and clients, financial information, brewing recipes and techniques, branding, marketing and related intellectual property. This information has value for the company only if it is kept within the business, so care must be taken in protecting this confidential information both during the employee’s service and after termination.
Confidentiality and intellectual property agreements are therefore very important for members of the sales team and should carefully cover the return of customer and client lists, sales documentation and company financial information once an individual has left employment.
The sales team fills a critical role in the brewing industry that presents its own unique challenges for employee classification and compensation. State laws are myriad and varied, and payment schemes and employer policies need to be carefully evaluated and vetted before being put in place.
This in-depth feature was contributed by Kathleen A. Spero, Esq, just another of the super smart attorneys with The Original Craft Beer Attorneys. If you haven’t yet, check out their new book.
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