Sales Commission Act

Your relationship with your Michigan sales representative ended. Now there is a dispute as to the amount of sales commissions owed on past sales. The parties’ agreement doesn’t clearly specify when the commission was earned, how the commission was determined, or how long post-termination it is owed. To make matters worse, the sales representative owes you money for shortages or other damages and you want to reduce or set-off the commission owed. Can you? These considerations and others should be addressed clearly in the parties’ written agreement. But, they aren’t. Who can help you now?

Having intense knowledge and understanding of the Michigan Sales Representative Commission Act (SRCA) gives the Howard Law Group the upper hand when defending our clients in such cases. In fact, we recently defended an agricultural farm industry client against an SRCA claim in which the plaintiff sought commissions for life and over a million dollars in damages. Plaintiff received a ‘no cause of action’ verdict after trial while our client paid nothing and received its attorneys’ fees paid by the sales representative. See our issue of Michigan Lawyer’s Weekly. That’s HOW.

The Michigan Sales Representative Commission Act (SRCA) applies to sales representatives employed or contracted by a business (named a “Principal” under the Act) to sell tangible goods to customers and are paid a commission from the sales. Principals are individuals and legal entities that (i) manufacture, produce, import, sell or distribute a product in Michigan, or (ii) contract with a sales representative to solicit orders for, or sell, a product in Michigan.

The remedies for violating this law are harsh. Under the SRCA all commissions due at the time of termination of the sales representative agreement (whether written or oral) shall be paid within 45 days after the date of termination. Not only can the sales representative recover the commission due, but the SRCA provides that the business can be liable for three times the commission owed (up to $100,000) as additional damages, plus attorney fees and court costs. The additional damages can be assessed simply if the business purposefully withheld payment, believing the money wasn’t owed.

But, what if the sales representative owes you money? Recent case law has found that nothing in the SRCA allows businesses to reduce, or set-off a commission payment based on damages or expenses that might otherwise be owed by the sales representative. Rather, the Principal would need to bring a separate claim to recover amounts due. Set-offs or other damages do not provide the business with a defense to not pay the commission earned by the sales representative.

The Michigan Sales Representative Commission Act is a complex law — and if you find that you and your business must defend yourself against it, it is certainly not one to be taken lightly. In fact, our highly experienced Michigan trial lawyers consistently win commercial litigation cases involving sales commission disputes and have a hard-earned reputation for aggressively seeking to bring such cases to trial.