A recent decision by the Seventh Circuit Court of Appeals highlights the importance of paying commissions to employees as soon as practicable. Waiting too long to pay commissions, even if this wait is in accordance with employment contracts governing when commissions should be paid, could be in violation of the Illinois Wage Payment and Collection Act.
The case, titled Daryl Sutula-Johnson v. Office Depot, Inc., involved a plaintiff who sold furniture for Office Depot. She received a commission on furniture she sold, and Office Depot usually paid these commissions 45 days after the end of each quarter. The Illinois Wage Payment Act requires employees to be paid twice a month, but creates an exception for commissions, stating that they can be paid monthly.
The court held that because Office Depot paid its commissions 45 days after the end of each quarter, and not monthly, it was in violation of the Wage Payment and Collection Act. It rejected Office Depot’s argument that commissions are not earned until they are paid, holding that it did not make sense for the company to determine that a commission was earned three months after a sale was completed. This is despite the fact that Office Depot had a contact with the employee that stated that commissions are not earned until they are paid.
This decision could be problematic for employers. Often companies are not paid for sales until months after the sale has taken place. Under the court’s interpretation of the Wage Payment and Collection Act, in such a situation the employer would have to pay the employee commission even before receiving payment.
Since this case involved a federal court ruling on Illinois law, it is not binding on Illinois courts. However, it is persuasive, and it is possible that Illinois courts will follow the Seventh Circuit’s interpretation of this issue. Therefore, employers should probably try to pay employees their commissions within one month of the employee earning it. If the employer cannot pay a commission that frequently, it should document the reasons why it cannot do so, and make sure that this documentation shows that paying these commissions monthly would be extremely burdensome to the business. Feel free to contact me if you have questions about how to do this.
