Unpaid Commissions Claims for New York Sales Employees

What does an unpaid commission case actually look like?

Almost never a flat refusal to pay. It is a rule applied at the moment the money comes due, usually to someone who is leaving or has just left. The patterns we see most often on Long Island and in the city:

• The deal closed after you gave notice You sourced it, negotiated it, and signed it. The purchase order lands three weeks after your last day and the employer keeps the commission.
• “You have to be employed on the payout date.” A policy nobody showed you at hire appears in an email after you resign.
• The plan changed retroactively Rates are cut, quotas are raised, or accounts are reassigned mid-year and applied to deals already booked.
• House accounts and split credit A manager reassigns your largest account to themselves or to a “team” split after the sale closed.
• Endless clawbacks Commissions are reversed months later for cancellations, returns, or customer non-payment, and the reversal comes out of commissions you earned on unrelated deals.
• The draw becomes a debt A draw you lived on for two years is suddenly “recoverable” and is being deducted from every check.
• The commission report is the only record No signed plan exists; the employer produces a spreadsheet it created and controls.
• Payment is deferred indefinitely Commissions are trued up once a year, or paid only when the customer pays.

Because one plan document is applied to an entire sales force, these claims usually affect every rep in the department, which is what makes them viable as group actions alongside the other claims on our wage and hour class actions page.

Are commissions wages under New York law?

Yes, once earned. New York Labor Law § 190(1) defines “wages” as earnings for labor or services rendered, regardless of whether the amount is determined on a time, piece, commission, or other basis. That single clause is what converts a commission dispute from an ordinary contract fight into a Labor Law claim carrying liquidated damages, interest, and mandatory attorneys’ fees.

Section 190(6) defines a commission salesperson as an employee whose principal activity is selling goods, services, real estate, insurance, or securities and whose earnings are based in whole or in part on commissions. It excludes employees whose principal duties are supervisory, managerial, executive, or administrative, so a sales manager carrying a personal quota is a gray area that turns on day-to-day duties, not the title on the org chart.

One limit matters: the Labor Law protects commissions that have been earned. Compensation that is entirely discretionary, where management decides after the fact whether to pay anything, is treated differently. Most real sales plans are not discretionary. They are formulas, and a formula you satisfied produces a wage.

When is a commission actually earned?

This is the question every commission case turns on. New York courts look to the parties’ agreement first. If the written plan clearly and unambiguously states when a commission is earned (on booking, on shipment, on customer payment), that provision generally governs.

Where the agreement is silent or ambiguous, the common-law default fills the gap: a salesperson earns the commission when they produce a ready, willing, and able buyer, meaning when the work that generated the sale is substantially complete. Under that default, the commission is yours even though the invoice, the shipment, or the payout date falls after your employment ended.

Two consequences follow. A forfeiture-on-termination clause has to actually be in a signed document, stated plainly; employers routinely assert one that exists only in a slide deck or a manager’s email. And ambiguity in a plan the employer drafted is generally construed against the employer, so a vague plan is not the shield it is treated as. If commissions are on the table in an exit negotiation, that leverage matters: see severance and employment contracts.

Why does the written commission agreement requirement matter so much?

Because the recordkeeping burden is the employer’s, and most employers fail it. NYLL § 191(1)(c) requires that the agreed terms of employment for a commission salesperson be in writing, signed by both the employer and the employee, and that the writing describe how wages, salary, drawing account, commissions, and all other monies earned and payable are calculated. If the plan includes a recoverable draw, the frequency of reconciliation must be stated. The employer must keep the agreement on file for at least three years.

The consequence of not having it is severe: the statute provides that the employer’s failure to produce the written terms gives rise to a presumption that the terms the salesperson describes are the agreed terms. Where the employer’s whole defense is “the plan says you forfeit,” the absence of a signed plan can end the argument.

The same section sets the timing rule. Commissions must be paid according to the agreed terms and, at a minimum, at least once a month and no later than the last day of the month following the month in which they were earned. Quarterly payouts and annual true-ups do not satisfy that on their own, and late payment of wages is itself actionable in New York, the principle behind claims over late pay for manual workers.

Are chargebacks and draw recoupment lawful deductions?

Sometimes. NYLL § 193 allows only a narrow, enumerated set of deductions from wages: taxes, insurance premiums, and similar items authorized in writing for the employee’s benefit. Shifting the employer’s business losses onto the employee is not among them. The analysis comes down to timing:

• A condition on earning If the signed plan says a commission is not earned until the customer’s payment clears, and the employer applies that rule consistently, a reversal on a non-paying customer is generally treated as a commission that was never earned rather than a deduction.
• A deduction after the fact If the commission was earned under the plan and the employer later takes it back (for a cancellation, a return, churn, a bad debt, or a coworker’s error), that is a deduction from wages, and it has to fit within § 193 or it is unlawful.

Draws follow the same logic. A draw is recoverable only if the agreement says so, in writing, with the reconciliation frequency stated. Where the plan is silent, a draw generally functions as guaranteed pay the employer cannot claw back. Charges for sample costs, CRM fees, or a share of a client’s unpaid invoice belong to the same family of claims as other unlawful wage deductions.

Do unpaid commissions change what you are owed in overtime?

Often, and this is the piece most people miss. If you are non-exempt, nondiscretionary commissions must be included in the regular rate used to compute overtime. When a commission covering several weeks is paid later, the employer must allocate it back across those weeks and recompute the premium for each. Employers that pay time-and-a-half on base salary alone underpay every overtime hour in every commission period.

Two exemptions get invoked here, and both are narrower than employers assume. The outside sales exemption covers only employees customarily and regularly engaged away from the employer’s place of business. Inside sales staff working the phones do not qualify. The retail and service establishment exemption in FLSA § 7(i) applies only where the employer is a retail or service establishment, the employee’s regular rate exceeds one and one-half times the applicable minimum wage, and more than half of the employee’s compensation over a representative period comes from commissions. Fail any element and overtime is owed for all hours over 40 in a workweek. If that describes your job, read unpaid overtime and run your own numbers with the unpaid overtime calculator.

How far back can you go, and what is the claim worth?

Six years under the New York Labor Law, and generally six years on a breach of contract claim on the plan itself. The federal piece (overtime miscalculated because commissions were left out of the regular rate) allows only two years, or three if willful, and that clock keeps running for each worker until that worker joins the case.

On top of the commissions themselves:

• Liquidated damages of 100% under NYLL § 198(1-a), unless the employer proves a good-faith basis for believing it was complying.
• Prejudgment interest on the unpaid amounts.
• Statutory damages for wage notice and wage statement failures under NYLL § 195, which commission employers violate frequently because the notice must state how pay is calculated.
• Attorneys’ fees and costs, shifted to the employer.

If you sold as an independent contractor, a different provision may apply. New York’s Sales Representative Act, NYLL §§ 191-a through 191-c, requires commissions earned by an independent sales representative to be paid promptly after the relationship ends and provides for double damages plus attorneys’ fees where the failure to pay was willful. Whether you were properly classified at all is its own question: see independent contractor misclassification.

What records prove an unpaid commission claim?

Commission cases are won on documents, and most of them sit in an account you lose access to the day you leave. Gather now:

• The signed commission plan, offer letter, and every amendment, including superseded versions, a rate that changed mid-year is evidence.
• Commission statements and pay stubs for the full period, so the formula can be reverse-engineered and compared against the plan.
• CRM exports (Salesforce, HubSpot, or similar) showing the deals you sourced, the close dates, the amounts, and who was credited.
• Signed contracts, purchase orders, and invoices for the disputed deals.
• Emails and Slack or Teams messages where a manager confirms a number, approves a split, promises payment, or reassigns an account.
• Quota letters and comp plan announcements, including the kickoff deck.
• Your own running log of deals and expected commissions, kept as you went.

Take what is lawfully yours: your pay records, commission statements, and emails. Do not remove confidential customer lists or proprietary files, and check any confidentiality agreement before you copy anything.

What should you do if your employer is withholding commissions?

1. Do not sign a release, a “final commission” acknowledgment, or a severance agreement without review. A modest final check can extinguish a six-year claim.
2. Ask for the commission plan in writing while you are still employed, and save the response. If none exists, that silence is useful.
3. Export your CRM and forward your commission statements to a personal account before access is cut off.
4. Put the disputed deals in a list: customer, close date, contract value, commission rate, amount expected, amount paid.
5. Do not wait out the employer Commissions are due monthly under NYLL § 191(1)(c); a promise to “sort it out next quarter” is not a reason to delay.
6. If your accounts, territory, or schedule changed after you raised it, note the dates. NYLL § 215 makes retaliation for a wage complaint a separate claim: see retaliation and whistleblower.

TA Legal Group represents employees and executives in the great majority of its matters, and employers in a limited number of them. We run a conflict check before taking any case. Fee arrangements depend on the matter. Many employee-side cases are handled on a contingency fee basis, where there is no fee unless we recover for you and case costs and disbursements are advanced by the firm and reimbursed from any recovery. Other matters are handled on a retainer, and we tell you in writing which applies before you commit to anything. The initial consultation is always free and confidential. Most commission conversations start with two documents: the plan you signed and the last statement you received. Contact us or call 631.498.7984.