Recovering Sales Draws and Advances Paid in Excess of Earned Commissions
- By Your mom
- •
- 01 Apr, 2008
Sales representatives often are paid a “draw” against future earned commissions. When a
representative leaves the company, and has been paid a draw that exceeds actual earned
commissions, employers will forfeit the overpayment, unless the situation has been addressed in
an agreement between the parties.
The Connecticut Supreme Court addressed this issue and found an employee does not
have to repay advances or draws that exceed earned commissions, unless an express or implied
agreement requires him to do so. Ravetto v. Triton Thalassic Tech., Inc., 285 Conn. 716 (2008).
In Ravetto the company sought repayment of some $40,000 in advances paid as a draw
against commissions to its Vice President of Sales. In reaching its decision the Court reviewed
the law in various states and found the majority rule requires an express or implied agreement be
in place for an employer to recoup advances exceeding earned commissions. The use of the
terms “advance” or “draw” are insufficient to support an argument for repayment.
The Court further explained that the employer usually drafts the employment or
commission agreement and its failure to include specific repayment language should not be held
against the employee. It also reasoned that providing advances or draws is a method of sharing
the risk between the parties with regard to future unknown sales revenues. Requiring an
employee to repay all unearned commissions without an express agreement to do so places all
the risk on the employee, which the Court found is contrary to the nature of a joint relationship.
Employers should review their employment and commission agreements for compliance
with the findings of the Court to permit recovery of unearned commissions upon the termination
of employment.
representative leaves the company, and has been paid a draw that exceeds actual earned
commissions, employers will forfeit the overpayment, unless the situation has been addressed in
an agreement between the parties.
The Connecticut Supreme Court addressed this issue and found an employee does not
have to repay advances or draws that exceed earned commissions, unless an express or implied
agreement requires him to do so. Ravetto v. Triton Thalassic Tech., Inc., 285 Conn. 716 (2008).
In Ravetto the company sought repayment of some $40,000 in advances paid as a draw
against commissions to its Vice President of Sales. In reaching its decision the Court reviewed
the law in various states and found the majority rule requires an express or implied agreement be
in place for an employer to recoup advances exceeding earned commissions. The use of the
terms “advance” or “draw” are insufficient to support an argument for repayment.
The Court further explained that the employer usually drafts the employment or
commission agreement and its failure to include specific repayment language should not be held
against the employee. It also reasoned that providing advances or draws is a method of sharing
the risk between the parties with regard to future unknown sales revenues. Requiring an
employee to repay all unearned commissions without an express agreement to do so places all
the risk on the employee, which the Court found is contrary to the nature of a joint relationship.
Employers should review their employment and commission agreements for compliance
with the findings of the Court to permit recovery of unearned commissions upon the termination
of employment.
