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Sam Salesdude is a sales representative in Minnesota who recently was unceremoniously terminated by Wonderful Widgets, Inc. On August 31, 2014, Steven Sales Manager apologetically told Sam that the company had decided to go in a different direction and Wonderful Widget was terminating Sam’s contract effective immediately. In fact, the contract required 30 days’ written notice. When Sam’s September commission check arrived, Wonderful did not include a commission statement and Sam estimated that his commissions were at least $20,000 short.

Sam should:

1. Cash the check and call Steven the Manager at Wonderful to discuss the shortage.
2. Tell Steve just what to do with Wonderful’s check.
3. Send a polite but firm letter to Wonderful, attaching a copy of the Minnesota sales rep act and graciously tell Steven that if the full commissions don’t arrive within two weeks, Wonderful could be looking at paying a lot more commissions, plus attorney fees.
4. None of the above.

Meanwhile, Ryan Repguy, has represented Perfect Plastics, LLC, in Wisconsin for almost 20 years. The commissions from the line represent more than 30 percent of his annual revenue. On October 1, 2014, Ryan got a call from Monty Manager telling Ryan that Perfect has decided to go direct and terminate Ryan, but Ryan shouldn’t worry because they are going to pay him for a year. A week later, a certified letter arrives telling Ryan that he didn’t hit quota and is being terminated for cause.

Ryan should:

1. Suck it up. No use burning bridges.
2. Call Monty Manager and tell him just what to do with his certified letter.
3. Write a letter, attaching a copy of the Wisconsin rep act and calmly explain that if Perfect doesn’t pay him a year’s commissions, it could be looking at a very costly lawsuit.
4. None of the above.

I recently participated in a MANA-sponsored meeting of lawyers from around the country whom MANA recognizes as having special experience representing sales reps. One topic discussed at the meeting was supplementing MANA’s online library of commission protection acts with a printed copy. Then, when a rep believes he is owed commissions or has been treated improperly, he can send his principal a letter and a copy of the act, and chances are the principal will pay up.

The lawyers all scrunched up their faces in concern. Cautiously, different lawyers began explaining why we thought this could really backfire. As lawyers started listing all the different ways reps could inadvertently give up their rights, the MANA staff agreed that this was a topic that would require careful, thoughtful study.

Even before the attorney meeting, I was asked to write an article for Agency Sales magazine, so I volunteered to try to explain this discussion to the MANA membership.

But let’s talk turkey — If I was a rep, wouldn’t I think that all those lawyers are just afraid of being put out of business? What’s the harm in trying to solve a problem yourself before you call in the legal cavalry?

Avoiding Harm

Unfortunately, there is real harm. And those of us who work with reps every day — many of us for decades — have seen reps inadvertently undermine their ability to recover commissions, by (as my grandmother would say) being penny wise and pound foolish when it comes to talking to the lawyers at their disposal.

When a rep comes to a lawyer having just been terminated, or not paid commissions, the lawyer helps the rep set the stage for recovery, determining how to put the rep in the best possible position, and evaluating all of the legal issues. The lawyer will help the rep craft a strategy. Often the lawyer will help write a letter or e-mail for the rep to send to his principal. The letter might solve the problem. Or it might be a terrific exhibit if you end up filing a lawsuit. In either case, that first communication can make or break a rep’s ability to recover. Maybe the lawyer will tell the rep to sit tight for a couple of weeks, because then he might be entitled to more commissions. Often the lawyer will tell the rep that he is not in a good legal position and he should use his time and money to focus on getting a new line or building his business.

A famous saying goes: “The lawyer who represents himself has a fool for a client.” Like lawyers, reps are rarely their own best advocates. The idea behind the adoption of the rep acts was to make it economically feasible for small business owners to recover their commissions. By allowing a rep to recover two to four times the amount of the unpaid commissions, as well as attorney fees and court costs, the sales representative acts were supposed to create the stick that would cause the malingering manufacturer to open his check book.

Confusing Laws

That’s the way it was supposed to be. But the enactment of rep acts has led to a tangle of confusingly worded laws and court decisions. State legislatures have enacted problematic laws that don’t say what many reps (and lawyers) think they say. Courts have issued rulings that have snipped away at the rights of reps.

Before I try to explain some of the pitfalls — and at the risk of sounding self-serving — the lawyers at the MANA meeting genuinely want to fight the good fight. Many of us have won seven- and eight-figure (as well as four- and five-figure) lawsuits on behalf of reps.

Some of the issues that impact a rep’s ability to recover commissions include the following:

• Was the contract really terminated? Even if the principal terminated the contract, should the rep agree to the termination, or take the position that the contract continues?
• What’s the best rep act to try to help with your particular situation?
• What law really applies? The law that is chosen in the contract? The law of the state where the rep lives? The law or laws of the states where the rep sells product?
• Do the different sales rep statutes that seem to come into play really protect the particular rep? What if the act talks about “wholesale” sales reps, as many of the laws do?
• Are you actually giving up commissions to which you might be entitled? The law and the language of a particular contract often require payment of more commissions than the rep realizes.

The issue of what laws apply has become increasingly complicated. Most written contracts contain a paragraph stating that the law of a certain state will apply. And most of the rep acts say that that state’s law will apply no matter what the contract says. Courts sometimes insist on applying the law of the contract, even when the rep’s own state’s law says that the rep should be entitled to sue under his own state’s law.

Sometimes the contract itself creates a Catch 22. For example, a rep in Virginia might have a contract that says that California or Minnesota law will apply. At first glance, that seems terrific: both states have powerful rep acts. But a closer look is more discouraging: the California and Minnesota rep acts both seem to protect only reps who sell in those particular states. Confused? With good reason. Those of us who wrangle with these issues every day are constantly analyzing court decisions, statutes and contract provisions to determine the best strategy to help our clients. Despite the obstacles, we know how to maximize the probability of our client’s recovering.

The answer to both of the multiple-choice questions is none of the above. These are examples of situations, including important commission or termination disputes, where you should get advice first and put yourself in the best possible position to recover every dollar that you earned. In the meantime, you can be doing your job — going out and selling product and looking for new lines to sell. You don’t need a lawyer to do that.