BY PHYLLIS FURMAN DAILY NEWS BUSINESS WRITER - Monday, October 22nd 2007, 4:00 AM
If you employ salespeople on commission, get your pen out and sign on the dotted line.
A little-publicized change in state labor law went into effect last week that puts pressure on employers to spell out how they compensate their sales staff.
Verbal agreements or handshakes will no longer do — employers must now get the terms down in writing or face some tough consequences.
The document must be signed by the employer and the employee and must be kept for at least three years.
The new law affects any boss who doles out commissions, from big stock brokerage firms to car dealerships to a mom-and-pop neighborhood store with only a few employees.
In the case of a boss who doesn't execute a legal document and has a salesperson who files a claim with the Department of Labor, the agency will accept the employee's version of the commission agreement.
"Not having the document is a business risk," said Tom Wassel, an employment lawyer at Cullen and Dykman in Garden City, L.I.
"If an employee complains to the Department of Labor and claims he has a more lucrative commission structure, the employer might have to pay more than he thought he should be paying," Wassel said.
The document must detail how commissions are calculated and how often an employer is obliged to pay up.
The agreement must also set out what happens to commissions earned if an employee decides to leave a company or is fired.
Expect to pay $500 to $1,000 in legal fees to draft such a document. Wassel said it's money well spent.
"An employer could end up paying much more in legal fees down the road if the Department of Labor were to begin an investigation or file a lawsuit," he said.
Mark David Fromm, CEO of Manhattan residential real estate brokerage firm Mark David & Co., said he already has an independent contractor agreement in place at his company that "spells out exactly how commissions are divided among the salespeople and the company."
"I had it from day one. I have no problem putting it in writing," Fromm said. "It's totally transparent.
He said he was not familiar with the new law, but planned to call his lawyer to learn more.
He added that he'd heard of other companies that had conflicts with sales staff.
"I think this would minimize disputes," he said." |
