Commission Law and Legal Definition

Commission is a term which has different meanings. It could refer to

  • A warrant or authority, from the government or a court, which empowers the person named to execute official acts. For example, the student received his commission to the U.S. Navy after graduation.
  • The authority under which a person transacts business for another.
  • A body of persons acting under lawful authority to perform certain public services. For example, the public service commission.
  • The act of doing or perpetrating a crime.
  • A fee paid to an agent or employee for a particular transaction. It is usually a percentage of the money received from the transaction. For example, a real-estate agent's commission.

A sales commission is a sum of money paid to an employee contingent upon an event, usually selling a certain amount of goods or services. Employers sometimes use sales commissions as incentives to increase worker productivity. A commission may be paid in addition to a salary or instead of a salary. The Fair Labor Standards Act (FLSA) does not require the payment of commissions.

In the case of a breach of an express contract provision, the employee is entitled to receive compensation for damages caused by the employer’s failure to fulfill its obligations under the contract. An employee may also be entitled to receive damages in connection with a violation of his or her implied rights. Recovery of damages in the form of commissions earned but not paid, in connection with work performed prior to the separation, for example, are generally recoverable.

The following is an example of a company's policy on commissions earned but not paid:

  • The Company will pay affiliates 30 days after the end of the month during which commissions were earned. This will allow for most returns, if any. You will be able to see on your screen the amount payable to you at any time.
  • If commissions earned during any calendar month are less than US$20, the Company may hold those commissions until the month in which the total amount due is at least US$20. In the case of overseas affiliates who may be subject to high fees per banking transaction, we will withhold payment until such time as a higher limit stipulated by you is reached.
  • Commissions earned but not yet paid will be held in a separate account until paid and will not be commingled with the Company's funds.