Legal Memorandum: Sales Representative Laws in MD

Issue: Under Maryland law, what is a company’s post-termination obligation to a salesperson for sales commissions on a product that will not be delivered until the following quarter if the company has never paid commissions prior to delivery?  

Area of Law: Administrative Law, Administrative Law & Regulation (Federal and State)
Keywords: Sales representative law; Payment of commissions earned by sales representatives
Jurisdiction: Maryland
Cited Cases: 297 P.2d 856; 658 A.2d 680; 198 Md. 526; 348 Md. 206; 339 A.2d 225; 144 N.Y.S.2d 128; 92 A.D.2d 821; 117 Md. App. 72; 212 Md. 181; 208 Cal. 447; 143 N.Y. 549; 207 Or. 462; 330 A.2d 189; 149 P.2d 177; 703 A.2d 148; 109 Wash. 2d 747; 359 P.2d 1104; 226 Or. 344; 114 A.2d 601; 357 Md. 533; 458 So. 2d 575; 35 A.2d 442; 211 Md. 323; 129 A.2d 75; 748 P.2d 621; 439 A.2d 34; 84 A.2d 870; 460 N.Y.S.2d 313; 134 N.J. Super. 238; 281 P. 604
Cited Statutes: Md. Code Ann., Lab. & Empl. § 3 504 (a) (1957 & Supp. 2000); Md. Code Ann., Lab. & Empl. § 3 507.1(a) (1957 & Supp. 2000)
Date: 06/01/2000

A number of states, including Maryland, have enacted statutes that provide specific requirements for payment of commissions earned by sales representatives.  Collectively known as “Sales Representative Laws,” most such statutes address how commissions are to be paid upon termination of the sales representative’s contract.  Typically, after the contract is terminated, the statutes require commissions to be paid within a certain time after the commissions become due.  CCH, Sales Representative Law Guide 3080 (1999).  However, such a provision is not construed to require payment of commissions that are not yet earned and payable.  Id.  Thus, if a commission is earned and due at the time of the termination but the commission is not to be paid until a customer

pays the principal, the statutory time period (e.g., forty-five days after receipt by the principal) would not come into play and start running until the principal receives the payment from the customer.  Id.

Maryland’s sales representative law applies only to situations in which a principal contracts with an independent sales representative to solicit wholesale orders in Maryland.  The law does not apply to salespersons who are considered to be “employed” under the Maryland Wage Payment and Collection Law.  However the Wage Payment and Collection Law does apply to sales representatives who are employees and requires employers to follow specific procedures.      

The Maryland Wage Payment and Collection Law requires every employer, at the time of hiring, to provide notice to the employee of (a) the rate of […]

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