Key Takeaways
- •Define the commission base, earning event and payment date separately.
- •Every percentage, tier, flat fee, base-plus or split needs complete terms.
- •A recoverable draw is different from base pay or a nonrecoverable guarantee.
- •Termination cannot automatically erase earned or legally protected compensation.
- •Actual classification, licensing and jurisdiction determine applicable requirements.
Reviewed for accuracy by the document.com legal team. Educational information, not legal advice.
What Is Commission Agreement?
A commission agreement records the compensation promised for qualifying sales, referrals or other defined work. It should identify the participants, scope, calculation, earning conditions, payment dates, records, adjustments and termination consequences.
The builder supports six relationship contexts and five calculation methods. It requires actual terms and review before presenting signature fields. Samples are unsigned drafts; they do not establish a license, worker status or comprehensive legal approval.
Resolve earning and payment before work starts
Ten percent of what? Define the base, deductions, allocations and an example. A split of a commission pool differs from a percentage of a customer invoice.
Earning a commission and being paid are different events. Set objective earning conditions, actual due dates or an objective formula and final settlement.
Write down what happens to earlier leads, later closings, recurring revenue and outstanding advances. Avoid a blanket forfeiture or implied personal loan.
Payment and licensing rules to review
Employee pay and independent sales representation differ
Coverage depends on the actual relationship and work. A commission label or tax form does not settle classification. Minimum wage, overtime, lawful deductions and final-pay requirements must be reviewed separately from independent wholesale sales-representative statutes. The federal retail/service commission overtime exemption has three conditions: a qualifying establishment, the required regular rate and more than half of earnings as commissions over a proper representative period. State law may be more protective.
California: written plans, copies and receipts
For covered employee commission contracts, Labor Code 2751 requires written calculation/payment terms, a signed copy and a signed receipt. The builder offers a separate receipt to sign only after delivery. Former Section 2752 was repealed; it is not a current treble-damages basis. Check final pay, deductions and actual worker status separately.
New York: covered wholesale representatives
Labor Law 191-a defines coverage and earned commissions. Sections 191-b and 191-c address written terms, signed copies/receipts and payment during and after the relationship. These are not interchangeable with employee wage rules. A commission may be earned or due under the actual contract; termination does not automatically erase it.
Texas: no universal thirty-calendar-day rule
Chapter 54 covers defined independent wholesale representatives. The thirty-working-day termination rule applies to an agreement that fails Section 54.002. Written computation/payment terms, a copy, venue restrictions and nonwaiver also matter. Do not insert a willfulness condition absent from Section 54.004.
Minnesota: demand, notice and accounting matter
Section 181.145 uses different demand-based deadlines depending on termination and notice, plus a special accounting period. Its daily penalty is not blanket treble damages. The statute distinguishes commissions earned through the last day from later-delivery claims; employee wage statutes require separate review.
Washington: earlier efforts can remain protected
RCW 49.48.160 requires covered written computation/payment terms and protects commissions on pre-termination efforts resulting in later sales. Its payment deadline runs from payment to the principal. An out-of-state venue provision cannot override the statutory restriction.
Illinois and Massachusetts: check both coverage and due date
Illinois’s covered nonemployee sales representatives have a thirteen-day post-termination payment rule. Massachusetts Chapter 104 uses fourteen days for its covered representatives and specifies willful or knowing nonpayment remedies. Neither is a universal deadline for every commissioned employee or finder.
Florida: remove the repealed citation
Florida repealed Section 686.201 effective July 1, 2011. Do not rely on it for a current forty-five-day payment deadline or treble damages. Other contract, wage and licensing rules may still control.
Real estate fees require an actual licensing and RESPA review
Identify the firms, licenses, supervising brokers, services, client permissions and financing. RESPA’s cooperative brokerage provision is 12 CFR 1024.14(g)(1)(v), with its own scope. It does not bless every referral or mortgage-broker fee. State fee-sharing restrictions still need review.
A finder label is not a registration exemption
The SEC guide identifies transaction-based compensation and actual activities as relevant to broker registration. One introduction or no handling of funds does not settle the issue. Review the transaction, solicitation, negotiation and any claimed federal/state exemption before acting.
Affiliate duties cannot be optional
Review actual attribution, recurring compensation, truthful claims, disclosures, monitoring and lawful data use. A contract cannot switch off applicable advertising duties. An affiliate-link label alone does not guarantee adequate disclosure.
Terms to complete
Actual parties, signing authority, locations, accounts and permitted work.
Calculation method, currency, base, tiers or split allocations and earning criteria.
Payment dates, invoice/service-list deadlines, statements and corrections.
Lawful adjustments, separate base pay, draw treatment and expenses.
Term, notices and compensation for earlier work after termination.
Classification, licensing, statutory payment protections and actual signed-copy delivery.
Six agreement contexts
Independent Sales Representative Commission Agreement
Employee Commission Plan
Real Estate Referral Commission Agreement
Finder’s Fee Agreement
Affiliate Commission Agreement
General Commission Agreement
How to Fill Out Commission Agreement
1. Identify the actual relationship
Choose the sales, employee, referral, finder, affiliate or general context and record the work, authority and locations.
2. Define earning and calculation
Specify the base and every rate, tier, fee or allocation, along with objective earning conditions.
3. Agree payment and exit treatment
Set due dates, records, adjustments, draws, expenses, notices and treatment of earlier work.
4. Review and execute
Check actual classification, licenses, mandatory payment rules and required copies/receipts. Sign only after the complete terms are resolved.
Key Terms Defined
- Commission base
- The expressly defined sales, revenue, profit or commission pool to which the agreed rate applies.
- Earned commission
- Compensation vested under the agreed lawful conditions and applicable law, distinguished from its payment date.
- Recoverable draw
- An advance reconciled against future commissions under lawful agreed limits; it is not automatically a personal loan.
- Tail
- An express continuation of compensation for qualifying earlier work after the relationship ends.
Related Documents
Employee plan
Requires employee wage, overtime, deduction and final-pay analysis.
Independent sales representative
Requires actual classification and the coverage of relevant sales-representative payment laws.
Real estate or finder
Requires specific licensing, activity and referral-fee review before work or payment.
Affiliate
Requires actual attribution, compensation and lawful promotional practices.
Legal Authorities & Sources
This page is grounded in primary law. The statutes and official resources below are the authorities behind the guidance above. Verify the current text of any statute before relying on it.
- California commission plan guidance
- California repeal of Labor Code 2752
- California deductions
- California paydays and final pay
- California worker classification
- New York Labor Law 191-A
- New York Labor Law 191-B
- New York Labor Law 191-C
- Texas wholesale sales representatives
- Minnesota commission payment
- Washington wholesale commissions
- Illinois Sales Representative Act
- Massachusetts Chapter 104 Section 7
- Massachusetts Chapter 104 Section 8
- Massachusetts Chapter 104 Section 9
- Florida 2011 repeal
- RESPA referral and fee restrictions
- SEC broker-dealer registration guide
- Federal retail commission overtime exemption
- FTC endorsement disclosures
Frequently Asked Questions
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