“If I am not paid commissions due me, is my non-compete still valid?”

Question: When I was hired, I had to sign a two-year non-compete. I want to leave this company due to the fact they withheld $300,000 in commissions due me.

Competing companies want to hire me. Since my employer breached my commission contract, am I still held to their non-compete?

Also, have employees been successful in suing over non-payment of commissions?

Mike
New Hyde Park, New York

Answer: Dear Mike:

1. First, the simpler answer: Yes, employees quite often win commissions lawsuits. Provided they are “in the right,” employees can and often do win lawsuits for commissions. It is important, though, to carefully review your commission agreement and “plan” to make sure that you are “in the right,” legally speaking. It might be a good idea to consult with an attorney on this. You should know that in New York State, where you live, employers who intentionally withhold earned monies from employees may be penalized by having to pay those employees an additional 25% of the withheld sums, and even the employee’s legal fees. In fact, most states have provisions in their laws such as these.   

If your present employer has not paid you compensation you’ve earned, you might want to make a formal request: first, it might work; second, it’s good “evidence” for later use in collection or, for example, to stand up against a non-compete. It’s our Model Memo Requesting Monies Not Yet Paid By Present Employer. You can adapt it to your own facts and circumstances. It shows you “What to Say, and How to Say It™” To get a copy, just [click here.] Delivered by Email – Instantly! 

If it’s a former employer who has not paid you compensation you’ve earned, you should consider requesting it. Don’t know what to say, or how to say it? Use our Model Letter entitled Demand for Unpaid Employment Conpensation. You can adapt it to your own facts and circumstances. To get your copy, just [click here.] Delivered by Email – Instantly! 

2Second, if your employer failed to honor an obligation to pay you commissions, you will probably have no problem defeating any attempt to enforce the non-compete in Court. The law in New York and in most states says that “If an employer comes to a Court to enforce a non-compete agreement, that employer will not be helped by the Court if it has not treated the employee fairly.” That is referred to the “Clean Hands Doctrine.” [As I always say, the law is a combination of common sense and common fairness.]

If you can show that you were not paid commissions due you, chances are the “Clean Hands Doctrine” will make your non-compete legally unenforceable in a Court.  

3. The real problem is not your employer bringing you to Court: it is the fear that prospective employers will have that, if they hire you, they will be sued by your employer. What many people do not really understand is that all employers fear getting a letter from a new employee’s former employer that says something like this: “Charley has signed a non-compete agreement with us, and his work for you is in violation of it. If you don’t fire Charley, we will sue you.” It is from this fear that many employers will decide not to hire a person in your circumstances, even if they might win in Court if sued by your former employer.  

4. That problem can be resolved by either (a) aggressive negotiation, or (b) proactive litigation. As I am confident you know, I always recommend engaging in smart, aggressive, sophisticated negotiation before even considering litigation. There are many ways to win an employment dispute without going to Court; in fact, that is the ideal thing to try to do. You’ll find many ways of doing this, and a whole lot of “tricks of the trade” on our blogsite. And, if negotiation does not work, you might be aggressive and go to Court to ask the Court to “declare” that the non-compete is void. This is what lawyers call a “declaratory judgment” lawsuit, and it often is a smart, proactive step to take.

 5. You might consider reviewing the many resources our blog has on (a) commissions, (b) collecting monies you are owed, and (c) non-compete agreements. We have three sections of our Resource Center devoted to the issues you present: (a) for Commissions, you might want to read a Q&A entitled “Commissions and Sales Bonus Plans: Read Them or It Will Cost You”, (b) for collecting monies owed you, I’d recommend you consider our Model Letter entitled “Memo Requesting Monies Not Yet Paid by Present Employer”, and (c) for Non-Competes, our Resource Section Q(ii), entitled “Non-Compete: Is It Enforceable?” 

For great info and insight, consider viewing our 12-minute Sklover-On-Demand Video entitled “Standing Up – Not Giving Up – When You Resign.” To do so, just [click here.]

6. You might also consider contacting our office (or your own employment attorney) for a consultation; $300,000 and your career would surely seem worth it. Commission disputes can be confusing, but we lawyers quite often find them to be quite an interesting challenge, as well. The law in almost all states is on the employees’ side in these matters; it’s usually a matter of making sure the documents and the facts are on your side, too.

Thanks for writing in, Mike. And thanks, too, for helping me illustrate the many ways to resolve what is an increasingly common problem for working people. I hope you have found this answer helpful.

Best,
Al Sklover

P.S.: If you’d like some personal attention and counsel, I make myself available for Private Telephone Consultations on the subject of Non-Competition and Related  Restrictions on your working freedom. Choose 30-, 60- or 120-minutes. If interested, just [click here.]

© 2011 Alan L. Sklover, All Rights Reserved.