The Seventh Circuit Court of Appeals recently upheld an order that required an employer, who had not established a clear policy on payment of commissions, to pay damages of $98,364 to a terminated salesperson.

The company’s policy on commissions was unclear about who was entitled to a commission and at what point the salespeople had earned their commissions.

Evidence showed the firm terminated an employee after she had obtained a “firm order” from a customer, but before the company had shipped any product or had received payment.

The Jury did not agree with the argument that the employee was not entitled to any commission unless she’d still been working when payment for the order was received.

The court will now decide if the company must pay additional damages as a late payment penalty under the Illinois Wage Payment and Collection Act.

Washington Employers Association, a human resource management organization, cautions that all commission eligible employees should receive documented notice of how commissions are determined and when they are earned.

Of particular concern are commissions to be paid to a departing employee. The group notes this is typically done with an individual agreement and not in the company handbook.