Sales Commissions: Right to Timely Payment under Missouri Law

Dolley Law, LLC represents and advises clients regarding legal rights and duties specific to the payment of commissions to salespersons in the State of Missouri. We have successfully represented clients in asserting and defending their rights in disputes about the payment of sales commissions in both state and federal courts. With this knowledge and experience, our attorneys can help advise you regarding your legal rights and duties related to sales commission payments.

The Missouri Merchandising Practices Act

The Missouri Merchandising Practices Act (“MMPA”) contains a subchapter specific to Sales Commissions. See § 407.911, et seq. RSMo. The subchapter requires timely payment of sales commissions to sales representatives conducting business in the State of Missouri and creates a cause of action for recovery of commissions, among other damages, in the event timely payment does not occur.

In particular, the law provides, in relevant part: “[a]ny principal who fails to timely pay the sales representative commissions earned by such sales representative shall be liable to the sales representative in a civil action for the actual damages sustained by the sales representative and an additional amount as if the sales representative were still earning commissions calculated on an annualized pro rata basis from the date of termination to the date of payment.” § 407.913 RSMo. “In addition the court may award reasonably attorney’s fees and costs to the prevailing party.” Id.

The statute addresses how the timeliness of sales commission payments should be determined. “When a commission becomes due shall be determined in the following manner:

1. The written terms of the contract between the principal and sales representative shall control;

2. If there is no written contract, or if the terms of the written contract do not provide when the commission becomes due, or the terms are ambiguous or unclear, the commission shall be paid when the product or service is delivered and accepted by the purchaser or the principal receives satisfaction in full;

3. If neither subdivision (1) nor (2) of this subsection can be used to clearly ascertain when the commission becomes due, then the commission shall be due on the date the principal accepts the order and receives satisfaction in full, unless the custom and usage prevalent in this state for the parties’ particular industry is different, in which event such custom and usage shall prevail.”

§ 407.912.1 RSMo. Further, “[w]hen the contract between a sales representative and a principal is terminated, all commissions then due shall be paid within thirty [30] days of such termination. Any and all commissions which become due after the date of such termination shall be paid within thirty [30] days of becoming due.” § 407.912.3 RSMo.

When, and to whom, does the Sales Commission law apply?

The Sales Commission subchapter of the MMPA contains definitions of the terms it uses—that is, definitions which elaborate on the nature and scope of the law’s protections. “Principal” is “a person, firm, corporation, partnership or other business entity, whether or not it has a permanent or fixed place of business in this state, and who:

1. Manufactures, produces, imports, provides, or distributes a product or service for sale;
2. Contracts with a sales representative to solicit orders for the product or service; and
3. Compensates the sales representative, in whole or in part, by commission.

§ 407.911(2) RSMo. As such, “principal” includes out-of-state entities “who contract[] with a sales representative to solicit orders in” Missouri. See § 407.914 RSMo. “Sales representative” means “a person, firm, corporation, partnership, or other business entity who contracts with a principal to solicit orders and who is compensated, in whole or in part, by commission, but shall not include a person, firm, corporation, partnership, or other business entity who places orders or purchases for its own account for resale.”

Finally, the statute defines “commission” as “compensation accruing to a sales representative for payment by a principal, the rate of which is expressed as a percentage of the dollar amount of orders or sales, or as a specified amount per order or per sale.” § 407.911(1) RSMo.

However broad these definitions may seem, it is important to note that some courts have narrowly interpreted these definitions and other language of the statute because they have concluded that the statute effectively imposes a penalty, in addition to damages, in the event of a violation. See, e.g., Schwab v. National Dealers Warranty, Inc., 298 S.W.3d 87, 90-92 (Mo. Ct. App. 2009) (employee was not paid “commission” because he was paid “based on a percentage of profits”—not sales or orders); Hoffman v. Van Pak Corp., 16 S.W.3d 684, 689 (Mo. Ct. App. 2000) (employer was not “principal” as defined by statute then-in-effect because it did not engage in “wholesale” sales).

Contact Us

If you have further questions or concerns about the nature and scope of rights and obligations for the payment of sales commissions and would like to speak with an attorney, contact Dolley Law, LLC by phone at (314) 645-4100 or by email at kevin@dolleylaw.com.