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Commission in a time of crisis

September 2011 - Employment. Legal Developments by Norrbom Vinding Law Firm, member of ius laboris.

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Pay, benefits & tax
A sales rep who was under notice and had been released from the duty to work could not have sold for EUR 32 200 in a 'dead' market. He was therefore not entitled to sales commission. But he was entitled to commission on a barter deal he had made.
Employees who are protected by the Danish Salaried Employees Act are entitled to pay during the notice period if their employment is terminated with their statutory notice. Under the Act, sales commission is regarded as pay in that situation. But how to calculate sales commission in the midst of a financial crisis? That was one of the questions before the High Court in this case.
A sales rep worked for a property investment company, which began to suffer when the financial crisis hit. To reduce its payroll, the sales rep was given notice and released from the duty to work.
After some time, a dispute arose between the sales rep and the company about how much pay he was entitled to receive during the notice period. The sales rep believed that he would have made a lot of sales during the notice period. He therefore claimed about EUR 32 200 in sales commission for the 4 months, based on his previous income.
In addition, the sales rep had been involved in a deal that entitled him to an overall commission of about EUR 55 000 under his contract. He had never seen that money.
‘Dead’ market
The company believed the sales rep’s calculations were far-fetched in a market that was feeling the full force of the financial crisis. With regard to the deal that had been made, the company submitted that it had informed the sales rep there would be no commission on that deal. It was not a sales deal, but a barter. The company gained a number of co-operative flats from the deal, not money.
The case ended up in the High Court. The Court ruled in favour of the company, finding it highly unlikely that the sales rep would have sold anything in the crisis-stricken market. Accordingly, he was not entitled to any commission during the notice period.
However, on the issue of the barter deal, the Court ruled in favour of the sales rep. The Court noted that his contract entitled him to a commission on deals that came through. So, since the company was unable to prove that it had told the sales rep before the deal that there would be no commission on it, it had not discharged the burden of proof. That cost the company about EUR 55 000.
 
Norrbom Vinding notes:
  • that the case illustrates that sales commission must be included in the remuneration payable during the notice period to salaried employees who have been released from the duty to work, but that several factors – including the market situation – may be taken into account when the size of the commission is calculated; and

  • that an employee’s remuneration – including bonus or sales commission – should generally comply with the provisions of the employment contract unless it can be proved that another arrangement has been agreed on a specific point.
The above does not constitute legal advice and should not be relied upon as such

For more information please visit www.norrbomvinding.com