According to the Texas Workforce’s interpretation and analysis, a common problem is that of what happens with an employer’s duty to pay commissions and bonuses once an employee has left the company. The answer depends upon the terms of the commission or bonus agreement. Commission pay agreements are enforceable whether they are oral or in writing, and agreements can be established with a showing of a pattern or practice of paying commissions in a certain way. Thus, the advice to have a clear, signed written wage agreement applies with particular force to commissions. Changes to written agreements must be in writing. A good agreement will avoid the risks of ambiguity by clearly setting out how commissions are earned, when and under what circumstances they are paid, whether “chargebacks” are made and under what circumstances, and what happens to commissions from sales in progress at the time of work separation. Similarly, a bonus agreement should specify exactly how a bonus is earned, how it is calculated, when it is paid, whether it is discretionary in any way (as to the amount, timing, or ability of the company to cancel the bonus altogether under certain conditions), and what happens to a bonus that is not determined or paid out until after an employee has left the company. If the commission or bonus agreement provides for payment of commissions and bonuses in any way after an employee has separated from employment, the deadline for such a payment would be based upon the wording of the agreement. Prior draws against commissions may be offset against the final pay; under 40 T.A.C. § 821.26(d), “[d]raws against commissions or bonuses may be recovered from the current or any subsequent pay period until fully reconciled.” The key to protecting the company’s interests is to spell out in a clear, written agreement exactly how, when, and under what circumstances commissions and bonuses will be paid, and then follow the written agreement to the letter, because that is how TWC will enforce the agreement in the event of a wage claim concerning such payments.
The Texas Family Code provides that garnishment for support obligations apply to certain post-termination lump-sum payments such as a bonus, commission, or payout of accrued leave (see Texas Family Code § 158.215): if such a lump-sum payment is $500 or more, the employer must notify the Attorney General’s office (do it in writing or electronically – see https://portal.cs.oag.state.tx.us/wps/portal/WageWithholdingResponsibilities#lumpsum) before making the payment so that that agency can determine whether a support deduction should be made. The agency then has ten days after that date to notify the employer about its duty to make the support deduction; if no such notification occurs, the employer may make the payment without the deduction. If, however, the agency informs the employer that the support order would apply to the lump-sum payment, the employer would need to make the deduction. Since such a garnishment would be pursuant to a court order, it would not have to be authorized in writing by the employee.
Williams, McClure & Parmelee is dedicated to high quality legal representation of businesses and insurance companies in a variety of matters. We are experienced Texas civil litigation attorneys based in Fort Worth who know Texas courts and Texas law. For more information, please contact the law firm at 817-335-8800. The firm’s new office location is 5601 Bridge Street, Suite 300, Fort Worth, Texas 76112.