Employment lawyers are often asked if an employee is entitled to commissions after there has been a separation of employment. The answer to the question is, it depends!
Are commissions considered wages under Nebraska law?
Yes. The Nebraska Wage Payment and Collection Act, Neb. Rev. Stat. §§ 48-1229, et seq. (the “Act”), governs employers’ obligations to pay wages to its employees in Nebraska. Wages, under the law, include:
- Compensation for labor or services;
- Unused vacation time that has been earned (often called paid time off or PTO);
- Commissions; and
- Any other fringe benefit an employer has specifically agreed to pay an employee at the time of separation.
When are commissions owed after separation of employment?
The default rule under the Act is that if an employee is owed commissions, then the employee is to be paid commission on all orders delivered and on all orders on file with the employer, even after separation of employment. Those commissions become due to the employee on the next regular payday after the employer is paid for the goods or services from the customer from which the commission was generated.
However, if at the time of commencing employment, or at least 90 days before separation of employment, the employer and employee come to an agreement on how commissions are to be paid, the agreement will govern. Consequently, an employee may agree that he or she is not entitled to commissions on file at the time of separation.
Example 1:
Sally sells radio advertisements for a local radio station. Sally gets $1000 for every advertisement agreement she sells. The radio station does not get paid for the advertisements until after the advertisements run.
Sally signs three advertisement agreements with three companies to begin running ads in August of 2023. The commissions total $3000. On June 15, Sally is terminated from her position. The ads begin running in August of 2023 per the agreements.
Is Sally owed her commissions?
Yes, the advertisements concerning the three agreements were made before Sally’s position was terminated. Even though the ads had not started to run, they were on file with the employer.
When are the commissions owed to Sally?
The commissions are owed to Sally on the next regular payday following the radio station’s receipt of payment for the advertisements.
Example 2:
Sally sells radio advertisements for a local radio station. Sally gets $1000 for every advertisement agreement she sells. When Sally started working for the company, she signed an agreement with her employer that stated: (1) commissions are paid to her by the radio station once the payments are received by the customer; and (2) Sally must be employed with the radio station when the commissions are to be paid.
Sally signs three advertisement agreements with three companies to begin running ads in August of 2023. The commissions total $3000. On June 15, Sally is terminated from her position. The ads begin running in August of 2023 per the agreements, and the customers pay shortly thereafter.
Is Sally owed her commissions?
No, even though the advertisement agreements were sold and on file with the company before Sally was terminated, her specific agreement with the company required her to still be employed at the time the commissions are to be paid. Because she was terminated before the commissions were due to be paid to her, no commissions are owed.
How can an employee recover unpaid commissions and other wages after termination?
Under the Act, wages are to be paid on the next regular pay period following the employee’s termination. If the employer has still not paid wages due to the employee after 30 days from that regular pay period, the employee may bring a lawsuit in state court to recover the wages owed.
Does an employer face consequences for not paying the wages?
Yes. Not only will the wages be required to be paid if the employee successfully proves that the wages were owed and unpaid, but the employer will also be subject to paying interest, filing fees and other court costs, penalties, and reasonable attorney’s fees.
What is the penalty?
If an employee is successful in proving a claim for unpaid wages, a court may require the employer to pay not only the wages owed to the employee but also an additional amount to the Nebraska State Treasurer. If the court finds that the employer willfully failed to pay the wages owed, the employer may be ordered to pay the Nebraska State Treasurer an amount equal to two times the unpaid wages recovered by the employee.
