Is an Employee Entitled to Commissions Paid After Termination? It Depends.

If you were a commissioned salesperson and you were separated from your job, you may wonder whether you’re entitled to receive the commissions you earned while employed, but that became payable after your separation. The answer to that question typically depends on whether you agreed to a forfeiture clause and the language in the forfeiture clause.

What is a forfeiture clause?

Generally, a forfeiture clause authorizes an employer to withhold payment of commissions to employees who are not employed at the time the commissions become payable. Employers typically include forfeiture clauses in employment contracts, employment term sheets, and/or employee handbooks. A forfeiture clause might read as follows: “no commissions shall be due and payable upon termination of employee.” Sometimes, however, the forfeiture clause will only apply if the employee was terminated for cause. These types of forfeiture clauses might read as follows: “no commissions shall be due and payable upon termination of employee for cause.” So, you should not assume that a forfeiture clause automatically disqualifies you from recovering commissions payable after termination.

Are forfeiture clauses lawful?

Yes. Although forfeiture provisions are not favored by Georgia courts, they are lawful under Georgia law (see, for example, Russell v. Kda, 206 Ga. App. 397 (1992)). In Russell, the Georgia Court of Appeals held that an employee was not entitled to commissions earned during his employment that became payable after his termination because the employee was bound by an unambiguous forfeiture provision in his employment contract.

However, in the absence of a forfeiture clause, an employer is required to pay commissions to its employee, including commissions payable after the employee’s termination. Contrary to popular belief, an employee’s “at-will” employment status does not relieve an employer of this obligation. If an employer fails to pay commissions, an employee has the right to file a breach of contract lawsuit against his employer to recover his actual unpaid commissions, attorney’s fees, and costs. An employee may also be able to recover exemplary damages (i.e., double the amount of unpaid commissions) as compensation for the delay in payment.

If you believe you are owed commissions, you should immediately consult with an attorney who knows Georgia law on unpaid commissions. SMITH LAW has successfully recovered unpaid commissions on behalf of employees in Georgia. Please contact us to find out if we can help you too.