Sales commissions are the primary source of income for numerous employees in the State of Alabama. Despite the significance of these commissions, many employees, and even some businesses, are not aware that the payment of these commissions are specifically protected under Alabama Law when the employee leaves the company. The Sales Representative’s Commission Contracts Act was enacted by the Alabama legislature to address the situation of employers hiring sales staff to develop relationships with customers only to then terminate them to avoid paying commissions.
A business who fails to pay a commission as required by this Act is liable to the sales representative in a civil lawsuit for three times the damages sustained by the sales representative plus reasonable attorney’s fees and court costs. For example, if an employer refused to pay $10,000 in earned commissions, the employer could file a lawsuit and receive up to $30,000 in damages plus receive an amount for any attorney’s fees they incurred.
The statute even applies to some commissions that are earned after the sales employee leaves the company. The statute requires that commissions “due at the time of termination” be paid within 30 days, but it also requires that commissions yet to accrue be paid within 30 days of the date on which they become due. Therfore, the statue specifically provides that a sales representative is to be paid commissions that accrue on accounts that, because of his or her efforts on behalf of the principal, continue to provide business to the principal following termination of the representatives.