An employee chargeback typically happens in sales jobs. The employee is paid a commission or bonus for the anticipated value of a sale that has not fully closed. If for some reason the sale falls through or the value of the sale is later reduced, an employer may try to offset its losses by taking back all or part of the commission previously paid to the sales employee. When this occurs, it is referred to as an employee chargeback. Here’s what you need to know about employee commission chargeback law:
Commission Chargeback Law: Is an Employee Chargeback Legal?
Most courts consider an employee chargeback legal if it is anticipated and included in the employment contract. On the other hand, if the employment contract is silent regarding the possibility of an employee chargeback, courts typically presume the employee is entitled to keep the commission.
The presumption in favor of the employee has been articulated in commission chargeback law for three reasons. Firstly, employers are considered to have more bargaining power in the employment relationship. Therefore, courts are more likely to hold them to whatever they include (or fail to include)in the employment contract. Secondly, courts are hesitant to require forfeiture of money already paid. And finally, the viewpoint that employees should not bear the burden of a company’s losses.
The Employment Contract is Key
An employer can overcome the presumption in favor of the employee by anticipating and articulating employee chargeback situations in the employment contract. Typically, employers reference employee chargebacks in contracts in two ways:
- an explicit or implicit agreement to pay back commissions
- characterizing money paid to the employee as a loan, often referred to as an advance
The Role of the Employee Charge Back Lawyer
An employer should work with an experienced employee chargeback lawyer to ensure that their employment contract contains a clear chargeback clause. In addition, an employee chargeback lawyer can analyze an existing contract for either an explicit or implicit chargeback clause for a sales employee. Likewise, an employee can benefit from an employee chargeback lawyer if they believe a chargeback was not anticipated or improper.
If you have questions about commission chargeback law or wish to consult an employee chargeback lawyer, contact us here. The Dallas employment lawyers at Rogge Dunn Group have the experience needed in all aspects of employment law, including employee chargeback clauses, to successfully prevent and/or resolve employment disputes.