Commissions & Bonus Payment After Termination or Resignation in Texas
Am I entitled to my bonus or commission payment after I leave the company?
For many employees and independent contractors, bonuses and commissions are an important and often times a substantial part of their compensation.
Even though an employee may receive most of his compensation through bonuses or commissions, it is often a bit unclear whether the employee is entitled to bonus or commission payments after a resignation or termination.
Texas employers generally have wide discretion to implement and modify the terms of a commission plan or bonus agreement, but they cannot interfere with an employee’s earned commissions. Common issues surrounding bonus and commission payments are when an employer changes an employee’s existing commission plan or bonus agreement, and when an employee is either terminated or resigns before the commission payment is made.
Factors that determine whether you may be entitled to receive payment
Whether an Texas employee may recover commissions and bonuses after termination or resignation is based on a number of factors, including:
- What the commission plan says;
- What policies the employer has in place concerning commissions and bonuses;
- The plan’s definition of when a commission is earned or accrues; and
- The duties, if any, needed to be performed to complete the sale at the time of the employee’s departure.
Not all bonuses are gratuitous, but can be a form of expected compensation for services rendered. When this is the case, an employee may be entitled to earned bonuses at the end of his or her employment just like he is entitled to any other earned compensation.
If a bonus is given in exchange for services rendered, it in effect becomes an enforceable contract once the employee performs the service. In those situations, if an employee is fired without good cause prior to the time specified for the payment of a bonus, the employee is entitled to a pro rata share of the bonus for the period actually worked.
Does the employment agreement cover bonuses and commissions post-termination?
The payment of bonuses and commissions after termination or resignation in Texas also depends greatly on whether there is an employment agreement. If there is an agreement that covers bonuses and commissions post-termination, then the agreement governs and the employee is limited to a breach of contract action to recover the unpaid bonuses and commissions.
This agreement may take the form of an employee agreement or at times a company-wide or department-wide bonus/commission policy. If the agreement states that an employee is entitled to bonuses or commissions under certain circumstances, then the employee has a claim for those bonuses and commissions under the contract.
What if the employment agreement does NOT cover bonuses and commissions?
If there is no agreement or if the agreement does not contain detailed provisions about bonuses or commissions after termination, an employee can bring a claim for quantum meruit to receive unpaid bonuses and commission. In a quantum meruit action, the employee must prove that:
- valuable services were rendered or materials furnished;
- for the employer;
- the services were accepted, used, and enjoyed by the employer; and
- under such circumstances as reasonably notified the employer that the employee expected to be paid a bonus or commissions.
If your employer has refused to pay a bonus or commission you believe you have earned, please contact us for help in recovering. We have assisted many employees and contractors in receiving the compensation to which they are entitled.