Continuing our series of posts on some of the basics of employment law, the following is an example of how laws affecting the workplace may not be as obvious as they first appear.
Most of the wage payment laws in Connecticut are set up in Title 31 of the Connecticut General Statutes. (Yes, probably more information than you wanted to know). But if a company sets up business relationships with people to solicit orders for products or services, there’s another title and chapter to consider — Title 42 (chapter 743ff).
In that chapter, Conn. Gen. Stat. Secs. 42-481 to -484 establish the laws governing commissions between sales representatives and companies. Notably, this statute does not include an employee of a company (in other words, sales representatives who are commission-based employees are not covered by this statute).
But for those companies that use sales representatives that are not employees (and are treated more as independent contractors), this law may govern.
Passed in 2005, this law provides that when a relationship is terminated, the company shall:
pay to the sales representative all commissions (1) that are due on or before the effective date of such termination, by the date specified in the contract or thirty days after the effective date of termination, whichever is later, and (2) that are due after the effective day of such termination, by the date specified in the contract but not later that thirty days after such commission becomes due under the terms of such contract.
Notably, a company that "wilfully, wantonly, recklessly or in bad faith fails to pay any commissions" shall be liable in a civil action for double damages and the "prevailing party" may recover attorneys fees and court costs as well.
And what creates a rebuttable presumption of "bad faith"? If a company fails to respond to a "written demand by a sales representative for commissions owed" not later than 30 days after the company receives the demand?
For companies that use sales representatives, this statute can have fairly serious consequences and I’d imagine that many companies are unaware of the "rebuttable presumption" portion of the statute. Before you enter into a relationship with such sales representatives, make sure that any contract for commissions complies with the language of this statute.
Indeed, any provision in a contract that waives the above sections will be deemed to be void.
One last note, the statute does indicate that this may not be applied to cover an "insurance producer or producer or an insurer" or any person who holds a "real estate salesperson’s license". So again, check the law to see if your particular situation may or may not be covered.