In an earlier post regarding payroll deductions, I promised to write about the unique aspects of deductions from a sales employee’s commissions. This topic is always ripe for discussion. Why? Well, good salespersons will make great commissions! They are winners. They don’t like to lose sales – or money. They are usually very aware of what they have sold and the related commission. Accordingly, when they see a deduction on a commission, or a commission less than they expected, naturally their radar goes on high alert. I can’t blame them, this is their bread and butter after all – and this is what drives them; these are folks generally highly motivated by monetary compensation – which is the whole point. They bring in revenue for the business and want to be rewarded accordingly.
There are actually two different aspects to salespersons commissions – with an extremely important distinction between the two. First, when can an employer deduct from commissions owed, due to errors or omissions? Second, when can an employer reduce a salesperson’s commission not due to the salesperson’s errors or omissions? Hopefully I can help clarify. However, for purposes of this post, I should specify that this is all about employed salespersons – not independent contractors. Commission salespersons who are independent contractors have their own prompt payment statute and that would throw us off track here.
Making Deductions From Commissions Due to Errors or Omissions
As I mentioned before, Minnesota law (Minn. Stat. 181.79) treats sales commissions differently when it comes to allowing wage deductions. Indeed, the wage deduction requirements for faulty workmanship, loss, theft, or damages do not apply when an employer has rules related to commissioned salespeople, when the rules are used “for purposes of discipline, by fine or otherwise, in cases where errors or omissions in performing their duties exist”.