Meroueh & Hallman

Sales Commission Agreements

May 16, 2017 by Zachary Hallman

Whether you are a sales representative and are owed commissions, or you are a principal attempting to negotiate a clear and concise sales agreement, there are specific laws in Michigan which apply directly to you, and Meroueh Hallman is here to help!

Michigan Law on Unpaid Sales Commissions

Michigan protects Sales Representatives through MCL 600.2961, the Michigan’s Sales Representatives Commission Act (“SRCA”), which requires a principal to pall all commissions due at the time of termination within 45 days after termination and to pay all commissions which become due after termination within 45 days after such commissions become due.  A principal that violates these provisions intentionally can be held liable for the overdue commissions in addition to punitive damages equal to double the amount of unpaid commissions, or $100,000.00, whichever is the lesser amount.  Additionally, a prevailing party under the SRCA is entitled to recover reasonably awarded attorney fees and court costs under the SRCA.

Who does the SRCA cover?

The SRCA covers sales reps if they are employed or contracted by a “Principal” to sell tangible goods to customers and are paid a commission from the sales. Principals are individuals and legal entities that; (i) manufacture, produce, import, sell or distribute a product in Michigan, or (ii) contract with a sales rep to solicit orders for, or sell, a product in Michigan.

Selling “goods” or “services”?

The answer to this question is crucially important because only a salesperson selling “tangible goods,” can be held liable for the treble damages provision of the SRCA.  The selling of services is not covered under the act.

Are oral agreements covered?

Yes, in the case of Ramirez v International Business Machines, the United States District Court for the Eastern District of Michigan ruled that the SRCA covered oral sales representative agreements.

Reviewing Agreements?

If you simply need review of your sales agreement, or would like help in editing or drafting a sales representative agreement, there are many issues to consider, such as:

1. How is the commission calculated (is it based on profits earned, if so, profits earned by what date, etc.)?
2. Is there a non-competition element to consider in this situation?
3. How long is the sales representative entitled to commissions for sales after voluntary resignation or termination? What is to happen upon date of termination?
4. When is the commission deemed earned by the sales representative?
5. What happens when/if ownership of principal changes?

At Meroueh & Hallman, we represent both sales representatives and the principals involved in sales representative disputes and negotiations and are prepared to take this matters to trial for our clients.  Please call us with any questions that you have and/or if you would like to set up an appointment at (313) 582-7469.