Georgia Sales Representative Statute: Legal Remedies When an Employer Refuses to Pay Commission
From time to time, we receive calls from Atlanta-based sales representatives with a variation of the following problem: Potential Client is employed by Company A, which manufactures a certain product. Potential Client’s job is to contact retailers to secure orders of Company A’s product, and Potential Client gets paid on commission based on the amount of Company A’s product that he sells. Potential Client secured such orders, and then was fired by Company A. Company A is refusing to pay the agreed upon commission for Potential Client’s sales work. What is Potential Client to do?
In this situation, the sales representative statutes in the Official Code of Georgia may be helpful. These statutes, located at O.C.G.A. 10-1-700, et seq., define the circumstances in which a former sales representative can file a lawsuit against a former employer for the amounts they are owed, plus double the amount that has been wrongfully withheld. In order to qualify to use the statute, a potential client must fall within the definition of a sales representative while his former employer must fall within the definition of a principal.
According to O.C.G.A. 10-1-700, a principal is a person or entity who (1) makes or distributes a product, (2) employs a sales representative to make sales of the product, and (3) pays the sales representative for his work at least partially on a commission basis. Though the title of this section refers to “out-of-state principals,” no such requirement is included in the definition of principal, and there does not appear to be any case law on this matter. A sales representative is a person who tries to obtain wholesale orders of the principal’s product based on his agreement with the principal to be paid at least partially on a commission basis. All of the elements of these definitions must be met. (Please visit http://www.lexis-nexis.com/hottopics/gacode/default.asp to read the full text of the definitions).
Assuming that these definitions apply, O.C.G.A. § 10-1-702 provides for a 30 days waiting period after the business relationship ends before a sales representative can file suit. This waiting period is specified by the following language: “when a contract between a principal and a sales representative is terminated, the principal shall within 30 days after the termination of the contract pay all commissions due to the sales representative.” O.C.G.A. § 10-1-702(a). If the principal does not pay within the 30-day period, the sales representative is then free to file suit seeking the amount he is owed, an additional two times the outstanding amount, and reasonable attorneys fees. However, a note of caution: sales representatives should be careful to only bring proper actions under the sales representative statutes. If the court determines that an action is baseless, the court may order the sales representative to pay his former employer’s attorney’s fees for the action.
