Oregon Commission Pay Laws

Employee commissions – as opposed to independent contractor commissions – are most often treated as a "wage" with all associated employee rights. Hekker v. Sabre Const. Co., 265 Or 552, 560 (1973)("Courts have frequently construed 'wages' in remedial or protective legislation to include compensation in the form of commissions"). In practice, this means that employees have a wide array of powerful tools for collecting unpaid commissions.

Disclaimer: This article discusses a handful of fundamental issues related to commission pay in Oregon. It is neither a complete nor comprehensive summary of the current state of Oregon law. Please do not rely on anything in this article. If you need legal help, please read more about our intake process or contact the Oregon State Bar Lawyer Referral Service.

Commission Contracts

Commission pay is largely a function of contract law. If two parties have a written commission plan, the terms of that plan are extremely important in determining how a related dispute will be resolved.

That said, workers do not necessarily need a written agreement to have a valid claim for commission pay. See, e.g., Richanbach v. Ruby, 135 Or 117, 120 (1930). If an employer’s promise to pay a specific amount of commission-based compensation motivates an employee to perform work for the employer, the employee may have a claim to commissions as soon as they are vested.

Oregon’s at-will employment doctrine allows employers to prospectively set and change commission pay with proper notice to the affected employees. However, an employer’s unilateral change in terms of employment may only apply prospectively, not retroactively. Olson v. F & D Pub. Co., Inc., 160 Or App 582, 588 (1999) ("An employer cannot inform an at-will employee that wages have been retroactively reduced. Wages for past work within the employment relationship are 'earned' and 'vested.'"). A change in terms will not typically extinguish a right that is earned or vested prior to the modification. Id.

Common commission pay legal cases revolve around:
  • When and how are commissions earned?
  • Exactly how are commissions calculated?
  • When are commissions payable?
  • What happens if employment ends after the work is complete but before the money comes in?
  • Does an employee have a right to review payments or accounting records to verify commission pay calculations?
  • Can an employee file a lawsuit to recover unpaid commission or must the dispute go to mediation, arbitration, or some other private dispute resolution process?
  • Did the parties clearly agree to specific relevant terms, in writing or otherwise? If so, that is usually a good starting point for evaluating the issues. However, disputes are common where the parties disagree about their original agreement.
These ambiguities, performance problems, and other issues with commission pay inherently implicate Oregon contract law. Covering Oregon contract law is beyond the scope of this article. However, it is important to understand that actual terms of any commission pay agreement will be fundamentally important to resolving disputes.

Employee-Related Commission Pay Rights

In addition to contractual rights, Oregon state law provides many important employee-specific rights related to commission pay. Commission pay to an employee is a “wage” under Oregon’s wage and hour laws. Hekker v. Sabre Const. Co., 265 Or 552 (1973). Oregon is one of many states that classify commission pay as wages. See, e.g., Community Telecommunications Corp. v. Loughran, 651 A. 2d 373 (Me., 1994)(citing Oregon as one of several jurisdictions where commissions are wages for the purpose of state wage and hour laws also citing: Hofer v. Polly Little Realtors, Inc., 543 P. 2d 114, 116 (Co. 1975)(Colorado); Licocci v. Cardinal Assocs., 492 N.E. 2d 48, 56 (Ind. 1986)(Indiana); and Brown v. Navarre Chevrolet, Inc., 610 So. 2d 165, 169 (La. 1992)(Louisiana)). As a wage, there are several Oregon statutes and regulations that provide employees with a collection of important rights and remedies against employers who fail to properly pay commissions.

Below are a few examples of employee status-related rights.

(1) Records

Oregon law imposes a number of record-keeping requirements on covered employers.
  • ORS 652.610: This law requires employers to provide itemized statements of withholdings and deductions. It also prohibits employers from wrongfully withholding, diverting, or deducting from employee wages, including commissions.
  • ORS 652.750: This law provides employees the right to access a copy of their personnel file.
  • ORS 653.045: OAR 839-020-0080(4) explains, “[w]ith respect to each employee in a bona fide executive, administrative, or professional capacity […] or in outside sales […], employers must maintain and preserve records containing all the information and data required by subsections (1)(a) through (e) of this rule and, in addition, the basis on which wages are paid in sufficient detail to permit calculation for each pay period of the employee’s total remuneration for employment including fringe benefits and perquisites.” Subsection (1)(j) requires employers to keep records of  “the dates, amounts, and nature of the items which make up the total additions” to an employee’s pay.
  • Special Record Keeping Requirements: In some special circumstances, BOLI regulations require employers to keep additional records. These regulations include: OAR 839-017-0004 et seq. (private employment agency records); OAR 839-014-0035 et seq. (farm worker camps); OAR 839-015-0004 et seq. (farm and forest labor contractors); OAR 839-021-0170 et seq. (employment of minors)
(2) Overtime and Minimum Wages

Many commission employees are exempt from Oregon overtime and minimum wage regulations. Exempt employees may include outside salespeople (ORS 653.020(6)) and retail or service employees paid on a commission basis (OAR 839-020-0125(2)(d)). If an employer does not actually meet the requirements for the relevant exemptions or cannot prove an employee’s exempt status, the employee may be entitled to recover overtime, minimum wages, penalties, liquidated damages, and other relief.

(3) Prompt Payment Upon Termination

Oregon law requires employers to promptly pay all wages upon termination of employment. ORS 652.140. Application of this rule in commission pay cases can vary widely. This is because the details of a given commission pay arrangement are based on the parties' specific agreement. Commission agreements can be dramatically different across industries, businesses, roles, etc.

(4) Bankruptcy Priority

Employee wage claims may be entitled to certain priorities in bankruptcy proceedings. While this topic is beyond the scope of this article, see the New York City Bar Association's Guide for Employees Whose Employer Files for Bankruptcy for more information.

(5) Bonding Requirements

In some cases, ORS 652.125 may provide a legal basis for the Oregon Bureau of Labor and Industries to require employers who cannot make timely wage payments to post a payroll bond.

(6) Protection from Retaliation

ORS 653.060 and ORS 652.355 provide employees with protections against discriminatory and retaliatory employment-related actions. Depending on the case, some employees may have additional protections under ORS Chapter 659 or 659A.

(7) Penalties

Employers that fail to properly pay commission wages on termination of employment may be subject to liability for penalty wages. ORS 652.150 allows some employees to recover penalty wages (up to 240 times the employee’s regular hourly rate) for willful violations of certain Oregon wage and hour laws.

For the purpose of penalty wage assessments, the Oregon Supreme Court has defined willful conduct as follows: 

In civil cases, the word “willful,” as ordinarily used in courts of law, does not necessarily imply anything blamable, or any malice or wrong toward the other party, or perverseness or moral delinquency, but merely that the thing done or omitted to be done was done or omitted intentionally. It amounts to nothing more than this: That the person knows what he is doing, intends to do what he is doing, and is a free agent. 

Sabin v. Willamette-Western Corp., 276 Or 1083 (1976).

An employer’s failure to pay a plaintiff's commissions is not willful where the employer has a bona fide belief that no commissions were due under the parties’ employment agreement. Young v. State of Oregon, 340 Or 401 (2006); Wilson v. Smurfit Newsprint Corp., 197 Or App 648 (2005)(“an employer lacks knowledge, and therefore does not act willfully, if it has a good faith belief that one of the elements necessary to trigger the obligation to pay wages owed at termination is lacking.”).

ORS 652.150’s “written notice of nonpayment” requirement: Where plaintiffs instituted action to collect their commissions on the date the commissions were due, no penalty was assessable under ORS 652.150 due to plaintiff’s failure to provide notice. Reed v. Curry-Kropp-Cates, Inc., 61 Or App 520 (1983)

(8) Prejudgment Interest

Burke v. American Network, Inc., 95 Or App 274 (1989) held that prejudgment interest accrues on unpaid commissions as of date of termination.

(9) Attorney Fees

ORS 652.200 allows employees to seek payment for attorneys’ fees in certain cases that proceed to a judgment. Wyss v. Inskeep, 73 Or App 661, n. 11 (1985)(“[t]he Supreme Court has held that an employe is entitled to attorney fees under ORS 652.200(2) in an action to recover unpaid commissions.”)

Common Law and Statutory Provisions Potentially Related to Commission Pay

Below are a few examples of common law and statutory provisions that are not necessarily related to the employee-employer relation that may provide workers with additional rights.

(1) ORS 646A Trade Practice

ORS 646A.097 requires timely payment of commissions in certain sales representative/principal transactions. This statutory scheme provides treble (i.e., three times) damages in appropriate cases, which provides employees with strong leverage in applicable cases. However, the statute also contains a reciprocal fee-shifting provision, which injects significant risk for all parties dealing with these claims.

(2) Implied Covenant of Good Faith and Fair Dealing

Oregon law recognizes that parties to a contract must act in a way that does not prevent performance or otherwise undermine the contract. Sheets v. Knight, 308 Or 220, 233 (1989). This duty generally applies to commission pay agreements. Wasserburger v. American Scientific Chemical, Inc., 267 Or 77 (1973); See also, New Jersey Model Jury Charge 2.15, which cites a commission agreement as an example where “an at-will employee may have a viable breach of implied covenant claim.”

(3) Commissions for Employees Ages 65+

ORS Chapter 124 may provide additional remedies for 65+ year old employees who are not paid employee commission pay. Under that law, certain employers may be liable for treble damages, costs, attorneys’ fees. See, ORS 124.110.

Resolving Commission Pay Disputes in Oregon

Parties frequently resolve commission disputes without court intervention. In Erickson v. American Golf Corp., 194 Or App 672 (2004), the Oregon Court of Appeals acknowledged:

In the context of an employment contract, if the prerequisites for an accord and satisfaction are met, a substitute agreement may be used to resolve good faith disputes between an employer and employee over the amount of commissions, overtime, salary, or other compensation. See, e.g., Massey et al v. Ore.-Wash. Plywood Co., 223 Or 139 (1960) (vacation pay); Lenchitsky v. H.J. Sandberg Co., 217 Or 483, 488-90 (1959) (commissions on sales); Shelley v. Portland Tug & Barge Co., 158 Or 377 (1938) (overtime and subsistence); Fogdall v. Lewis and Clark, 38 Or App  541 (1979) (annual salary).

Commission disputes that cannot be resolved informally may proceed to court, arbitration, or some other forum for resolving disputes. Depending on the parties’ agreement, some situations may require: (1) application of a specific state’s substantive or procedural law (choice of law clauses)(But see, ORS 15.320(3)(“the law of Oregon applies to […] contract of employment for services to be rendered primarily in Oregon by a resident of Oregon.”)); (2) confidential, private arbitration in lieu of a jury trial (arbitration clauses); (3) mediation or other forms of dispute resolution as a prerequisite to litigation/arbitration (alternative dispute resolution clauses); (4) specific geographic location for legal proceedings (venue selection clauses); (5) allocation of costs and attorneys’ fees among the parties (cost and fee-shifting clauses); and (6) adherence to time limitations and other procedural restrictions.

Miscellaneous Commission Pay Notes

Oregon courts have addressed a few other commission-specific legal issues in the following cases, including:
  • Hendrickson v. Xerox Corp., 751 F.Supp. 175 (D. Or., 1990): Employee’s claim for attorneys’ fees in commission pay dispute counted toward jurisdictional “amount in controversy.”
  • Gillman v. Emel, 89 Or App 153 (1987): Discussing legal versus equitable theories of recovery in commission pay claims.
  • Reed v. Curry-Kropp-Cates, Inc., 61 Or App 520 (1983): Allowing offset for employee breach of common law duties to employer.

Category: Wage & Hour