Can My Employer Withhold My Commission for Poor Performance or Missed Targets
In many industries, employees are compensated through a combination of base salary and commission, with the latter often being tied to performance or sales targets. This commission structure can be highly motivating for employees, but it can also raise questions when things don’t go as planned—especially regarding whether or not an employer can withhold commission payments due to poor performance or missed targets.
If you're in a position where commissions are a significant part of your income, it's important to understand your rights under employment law to ensure you are compensated fairly. In this blog, we’ll dive into the details of commission agreements, whether or not your employer can withhold your commission for missed targets, and what to do if you think your commission is being unfairly withheld.
What Are Commissions?
Commissions are a form of variable pay, typically paid to employees in sales, marketing, or other performance-based roles. These payments are typically a percentage of the sales or business they bring to the company. Commission pay is often structured to incentivize employees to meet or exceed specific performance targets, such as sales quotas or revenue goals.
In most cases, commission payments are made in addition to a base salary, and they can be a significant part of an employee’s total compensation package.
Can My Employer Withhold Commission Payments for Poor Performance or Missed Targets?
The short answer is: it depends on the terms of your commission agreement. Let’s break this down in more detail:
1. Commission Structure and Written Agreements
Whether or not your employer can withhold your commission due to poor performance or missed targets largely depends on what’s outlined in your commission agreement. If the agreement is clear about the conditions under which commissions are earned and paid, the employer typically has the right to withhold commissions if you fail to meet those conditions.
Example: If your agreement stipulates that you must meet a specific sales target (e.g., $50,000 in sales) to earn your commission, and you don’t reach that target, your employer might be within their legal rights to withhold commission. However, this must be clearly stated in the contract or commission plan.
2. Performance-Based Commissions
In many commission-based roles, employees are expected to meet certain performance metrics, such as sales goals, targets, or quotas. If these metrics are not met, the employer may argue that the commission was never "earned."
However, even in performance-based commission structures, employers are generally required to pay commissions that are earned prior to any decision to withhold or adjust payment. For instance, if you’ve already completed the necessary steps to earn the commission—such as making a sale or closing a deal—you should still be entitled to payment for that commission, even if the overall sales targets are not met.
3. The Timing of Commission Payments
Even if your employer sets specific targets or quotas for earning commissions, it’s important to note that commission payments are generally considered wages earned once the terms of the sale or deal are complete. If an employee has met the terms of the commission agreement, withholding earned commission may be considered wage theft under state or federal law.
This means that if the deal was closed or the sale made, the commission is earned, regardless of whether the overall performance targets were met or not. If your commission is withheld unfairly after completing your part of the sale, you may be entitled to take legal action to recover those wages.
4. Missed Targets and Unpaid Commissions
If a commission agreement involves performance-based metrics like sales targets, some employers may withhold commission payments if the employee fails to meet the target. This practice is more common in competitive fields like sales or real estate, where employees must meet or exceed specific goals to receive their commission.
However, even if your employer has set performance-based expectations, they cannot simply refuse to pay you for commissions you've already earned under the terms of the agreement. If the sale or contract was completed, the commission should still be paid, regardless of the targets not being reached.
5. Legal Protections Against Withholding Commissions
In many states, including Texas, laws regarding unpaid wages, including commissions, are strict. Under Texas law, commissions that are earned in accordance with a valid written agreement are considered wages, and employers are not allowed to withhold those wages for any reason unless there is a legitimate, agreed-upon reason for doing so.
If an employer withholds your commission illegally—either by changing the terms of your agreement without notice or failing to pay for completed sales—you can file a wage claim with the Texas Workforce Commission (TWC) or pursue legal action in court.
What Can I Do if My Employer Withholds My Commission?
If your employer is withholding your commission unfairly, here are the steps you can take:
Review Your Commission Agreement: Ensure that your agreement clearly outlines the conditions for earning and paying commissions. If the terms were met, you may have a valid case for receiving the withheld commission.
Keep Documentation: Document all sales, communications, and agreements related to your commission structure. This can include email exchanges, contracts, and any written performance goals.
Talk to Your Employer: If you believe the withholding is an error or misunderstanding, bring it up with your employer in writing. Be polite and professional in your approach.
File a Wage Claim: If your employer refuses to pay your earned commission or withholds it unfairly, file a wage claim with the Texas Workforce Commission (TWC). The TWC can investigate the issue and help recover unpaid wages.
Consult an Attorney: If the situation isn’t resolved through internal discussions or with the TWC, consider consulting an employment lawyer. A lawyer specializing in wage and commission disputes can help you understand your rights and pursue legal action if necessary.
Contact Our Unpaid Commission Lawyer
Commissions are a critical part of many employees' pay, and it’s important to know your rights when it comes to withholding or non-payment of commission due to poor performance or missed targets. While employers do have the right to set performance goals and expectations, they cannot withhold commission on earned sales or deals that meet the terms of the agreement.
If you believe your commission has been withheld unfairly or if your employer is violating your rights, it’s important to take action. Whether it’s through direct communication, filing a wage claim, or seeking legal advice, there are resources and options available to ensure you are compensated fairly.
At Fair Labor Law, we help employees understand their rights and take action when they’ve been denied their rightful pay. If you are facing issues with unpaid commissions, don’t hesitate to contact us for a consultation.
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FAQ: Can My Employer Withhold My Commission for Poor Performance or Missed Targets?
Q1: Can my employer withhold commissions if I don’t meet my sales targets? A1: Your employer may withhold commission if it is clearly stated in your agreement that you must meet specific targets to earn it. However, commissions for sales made before the target was missed should still be paid.
Q2: What if I completed a sale but missed my target? A2: If you completed a sale, you should still be entitled to your commission for that sale, regardless of whether you met the overall performance target. Withholding commissions for completed sales is likely a violation of wage laws.
Q3: How can I get paid my commission if it’s being withheld? A3: If your commission is being withheld unfairly, you can try talking to your employer, file a wage claim with the Texas Workforce Commission, or consult an employment lawyer for legal assistance.