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Are a Sales Representative’s Commissions Considered Wages Under NH Wage Law?

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NH Commissions – In the recent case of International Business Machines Corporation v. Khoury, the New Hampshire Supreme Court rejected an attempt by IBM to reduce the amount of commissions it was obligated to pay one of its sales representatives, where the company tried to do so by increasing the quota that the sales representative had to meet in order to be eligible to receive the commissions after the sales representative had completed the performance entitling him to such commissions.

Commissions for Sales Representative

IBM’s commission program entitled sales representatives to a primary commission for reaching a sales quota and a secondary commission for reaching a deployment quota.  In July of 2014, IBM presented the sales representative who brought the case an Incentive Plan Letter promising the sales representative the secondary commission if the employee met a quota of $571,000.00 for certain specified signings during the period of July 1, 2014, through December 31, 2014.  The sales representative’s manager advised him at the end of this time period that he would be entitled to a commission of $154,121.21 because he had met and surpassed his quota for the specified signings.  IBM only paid the sales representative a fraction of this commission amount, however, and in May of 2015 IBM advised the sales representative that it was adjusting his sales quota upward to $1,000,000.00 for the July 2014-December 2014 time period, thereby reducing his commission.

NH Wage Claim Violation

The Supreme Court found that IBM’s conduct amounted to a breach of its contractual obligations to the sales representative and a failure to pay wages due in violation of New Hampshire statutory law.  The Court determined that the Incentive Plan Letter constituted a contract.  The Court further determined that, under the contract, IBM lost its ability to modify the terms of the contract once it completed measuring business results for the relevant time period—which IBM had done by January 15, 2015.  So, the Court found, IBM’s decision in May of 2015 to increase the sales representative’s quota for the July 2014-December 2014 time period, so as to reduce the sales representative’s commission, constituted a breach of the Incentive Plan Letter and a failure to pay wages due in violation of New Hampshire statutory law, RSA 275:49.

If you believe your employer has denied you wages or commissions due, you should consult an attorney experienced in representing employees in employment disputes such as Benjamin King of Douglas, Leonard & Garvey.  Attorney King can be reached at (603) 288-1403 or fill out our online contact form.