Tech 4 Kids, Inc., makes toys, but was unable to play to U.S. retailers.
So T4K reached an oral agreement with Northern Group, Inc., an independent sales representative with offices in the Midwest, to promote its toy products. With no T4K market share, the parties understood that Northern would have to enter “pioneering mode” because it would take years to generate sales.
The Parties Reach an Agreement and Northern Sets Out Creating Demand
The oral agreement, reached in 2008, provided that Northern would receive a five percent commission on sales it procured for T4K. Not surprisingly, the parties never discussed … Read the rest
“Money is the most egalitarian force in society. It confers power on whoever holds it.” — Roger Starr, author and urban planning official
Reps who get stiffed on commissions usually agonize over what, if anything, to do about it. After undergoing root canals or tax audits, hiring a lawyer to pursue unpaid commissions usually ranks as a rep’s least desirable course of action.
Some might even prefer the endodontic drilling into a tooth to retaining legal counsel. And without anesthetic.
After all, withholding commissions is an easy and common exploitative tactic utilized by certain principals who view their sales reps … Read the rest
“Hey, Adam,” begins many an incoming office call, “the principal who owes me back commissions didn’t remember that our contract says Tennessee law (or Utah, Colorado, New Jersey, Georgia, etc.) applies. I can get triple commissions, right?”
“Well,” begins the formal, technical response to many such calls, while stalling for time. Then, the very first legal phrase taught in law school is invoked: “That depends.”
Many independent reps are familiar with sales rep protection statutes. These state laws are generally intended to help level the playing field with their principals when a commission dispute arises.
When a rep is terminated … Read the rest
Every experienced rep has stories like this to tell, most often from a relationship with a manufacturer who is not a MANA member.
Two and a half years invested in developing an account while receiving zero compensation, a rep meets with the first stirrings of success. The customer finally agrees to receive samples, and the rep happily reports this development to his partner, the manufacturer. The response is swift: termination. The samples, meanwhile, are on their way directly, and the deal with the customer closes soon after.
After enduring an uncertain relationship for years with a principal who pays late, … Read the rest
This column ordinarily features legal issues confronting independent sales representatives who promote manufacturers’ products, not company reps involved in marketing the services of their employers. However, when Keith Miller maintained he was mistreated by his principal, who also happened to be his employer, it happened in a manner so brazen that all independent reps will not only feel his pain, but will respect and cheer his concerted efforts to get paid.
Employed for several years as a field sales representative for Paul M. Wolff Co., a subcontractor specializing in concrete finishing services known as PMW, Miller was responsible for facilitating … Read the rest
Some manufacturers will initially consider a sales rep’s commission claim with sympathy, others with reasonableness, and perhaps most with nervous skepticism. Then there is The McGraw Hill Companies, Inc. (now known as McGraw Hill Financial, Inc.), a leading publisher of elementary school textbooks.
McGraw’s former educational division emptied the litigation arsenal in response to a claim brought by longtime independent sales rep, Shawn Kelly & Associates, for unpaid commissions (filed by this article’s author). It took the rep’s gritty determination to stand up for himself against a better funded, give-no-quarter defendant, for whom Kelly had netted millions in sales, to … Read the rest
Most agents properly focus on generating sales after signing with a new principal. Even as corporations constantly merge or get “restructured,” consideration of the potential impact on the agent is rare. Yet several important questions are usually presented:
- Is the independent representative’s commission stream adequately protected?
- What happens if the acquiring party purchases only some of the principal’s assets?
- And could the principal and the new purchaser orchestrate a sale enabling the purchaser to avoid paying commissions due?
These issues were front and center in a case recently decided by a Kentucky federal court after certain assets of a principal … Read the rest
It’s an old, even classic dilemma for independent sales reps, but it continues to play out across the country. Fueled by his own sweat equity over long hours and on his own nickel, an industrious rep scores a big customer contract for a principal. Rather than treating the rep to a steak dinner and a pledge to honor its contract by commissioning the rep on this new-found business, a notice of termination is issued. The principal then brushes off the rep: “We’ll pay you everything we owe you as of today, and best of luck in your future endeavors. What’s … Read the rest
In a sales rep contract drafted without attorneys and recently described by an appellate court as “doggone messy,” a pet supply manufacturer and its independent sales representative agreed the rep could be terminated “for cause” only under certain circumstances. As is so often the case, once the rep, Profit Pet, grew sales and the relationship was prospering, the principal, Dogswell, sought to tighten the contract terms and exercise more control. Not surprisingly, Profit Pet resisted, leading to its termination.
When Dogswell then attempted to classify the termination as “for cause,” Profit Pet sued to recover its commissions, and won
… Read the rest
Ameron International produces fabricated steel products. Its sales rep in Western New York, West Empire Associates, learned that the Buffalo and Fort Erie Peace Bridge Authority, operator of the famed Peace Bridge (connecting the United States and Canada), was considering re-coating the entire bridge. West Empire quickly arranged a meeting between Ameron and the Authority.
West Empire then worked the phones for a few months with the Authority and Ameron, but did not otherwise assist in the preparation of Ameron’s proposal for the Peace Bridge project. Shortly after participating in the initial testing of Ameron’s bridge coating, Ameron terminated West … Read the rest
Though this court case seemed like an easy win for the principal, this rep firm managed to get reimbursed for lost commission.
Consider these brutal but undisputed facts in the case of an independent rep seeking to recover, in court, a commission on the sale of a product (a cooling tower used in the beverage processing industry):
- The rep, MAK Automation, Inc., had an oral contract with its principal, GC Evans Sales and Manufacturing Co., Inc., that was non-exclusive, and did not furnish a specific geographical territory. The only undisputed contract term was that MAK had to generate or procure
… Read the rest
The process of entering into an effective rep agreement, or any other type of important contract or understanding, appears to be made more difficult each day.
Whether entering into a formal written contract or merely setting the time for a meeting, business requires constant negotiating. In fact, we have been negotiating since birth. As a wet or hungry newborn, we simply cried. Crying brought attention, and usually the desired result. Eventually (as we approached age 35 or so), crying grew unacceptable, and it became necessary to develop alternative negotiating skills.
Many have come away from a negotiation reluctantly admiring the … Read the rest
From time to time sales representatives deem it desirable to maintain an inventory of a manufacturer’s products for resale.
These representatives are often referred to as “stocking reps” or “buy-sell reps.” Far from repping pantyhose, a “stocking rep” buys inventory from a manufacturer and resells it to a customer, with the spread between the purchase price and the selling price as its gross profit. From a legal point of view, however, they are more like distributors than sales representatives. As such, there is a different set of risks and rewards to being a “stocking rep.”
A stocking rep … Read the rest
Working from an oral agreement made in 1999, Steinke & Assocs., a Michigan sales rep firm, began repping Loudon Steel, Inc., a metal products manufacturer. By October 2002, the relationship was starting to tarnish, and Steinke exercised its undisputed right to resign.
In its somewhat hasty letter of resignation, Steinke stated that its “only expectation” as to commissions is for payment of “commissions on the jobs that have been awarded to Loudon to date.” Although no written or oral agreement had been reached on post-termination commissions, Steinke crossed its fingers and specifically identified two contracts with Ford Motor … Read the rest