The Fair Labor Standards Act sets rules regarding overtime and minimum wage payment. However, it does not set rules regarding unpaid commissions. State law dictates whether an attorney can withhold commission payment.
Employers and employees have a contract that details how commission will be paid and when it will be paid. If the contract does not say that the employer can withhold commissions, then they have to pay a person according to the terms of the contract. State law dictates the terms of paying commission.
In Texas, the employer has to follow all of the terms of the written agreement. The state of Texas has stated that any agreements that are made orally can also be enforced. However, California and New York require that a written agreement be made.
How Does State Law Affect Employees Who Been Terminated?
State law may stop the employer from withholding commission payments even if the employee has been terminated. In the state of Maryland, employers must pay all commissions regardless of whether the person is fired or quits. An employer may have to pay damages, legal fees and three times the amount that is owed.
State laws can vary widely. That is why it is a good idea to consult with a commission dispute attorney specific to your state.
How Deductions are Applied
Employers have to withhold wage garnishments and payroll taxes from commissions. However, this is also dependent on state law. In Texas, an employer can take child support payments from a commission check. However, the employer has to talk to the attorney general if the lump sum amount exceeds $500.
Some states require that all of an employee’s earned wages be included in their final paycheck, which includes commissions. The commissions must be earned during the time that the written agreement was enforced. The past dealings of the employer and employee will determine how commissions are paid if the agreement does not address this.