Avoiding Labor Entanglements for Commission-Earning Employees in a Changing Legal Landscape

Laura Reathaford and Benjamin Stockman

Laura Reathaford is a partner in Venable’s Labor and Employment Group. She focuses her practice on management-side employment litigation, with an emphasis on wage and hour collective and class actions, including representative actions under the Private Attorney General Act (PAGA). In addition to defending employers in high-stakes litigation matters, Laura regularly advises clients on employment issues including terminating employees, drafting employee handbooks, and complying with wage and hour laws, as well as leave and disability rules.

Benjamin Stockman is an associate in Venable’s Labor and Employment Group. His practice is focused on a broad range of matters involving wage and hour law, employment discrimination, equal pay law, family and medical leave law, disability law, employee discipline and termination, and traditional labor matters, including defending companies in proceedings before the National Labor Relations Board.

Employers have paid salespeople by commission for centuries.¹ Commission pay is popular because it attempts to align the interests of employers and employees in a "win-win" compensation relationship.² Companies also like commission-based pay plans because the success of salespeople is easy to track with little supervision.³ Studies have shown that salespeople generally are more tolerant of risk and favor a compensation arrangement that rewards success with a potential financial upside.⁴