Commission Based Employment Contract for the United States

Commission Based Employment Contract Template for United States

A Commission Based Employment Contract is a legally binding agreement used in the United States that establishes the terms and conditions of employment where compensation is primarily or partially based on sales performance. This document outlines commission structures, payment terms, sales targets, and compliance with federal and state employment laws. It provides protection for both employer and employee by clearly defining commission calculations, payment schedules, and conditions for earning commissions.

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What is a Commission Based Employment Contract?

The Commission Based Employment Contract serves as the foundational document for sales-oriented positions where compensation is tied to performance. This contract type is essential in the United States market where commission-based roles are common across various industries. It addresses crucial elements including commission rates, payment terms, territory assignments, and performance expectations while ensuring compliance with both federal and state labor laws. The document is particularly important for establishing clear expectations and avoiding disputes regarding commission calculations and payments.

What sections should be included in a Commission Based Employment Contract?

1. Parties: Identification of employer and employee with full legal names and addresses

2. Background: Context of the employment relationship and purpose of the agreement

3. Definitions: Key terms used in the agreement, especially commission-related terminology

4. Commission Structure: Detailed explanation of commission rates, calculations, and earning conditions

5. Payment Terms: Timing and method of commission payments, including tax withholding requirements

6. Employment Status: Clarification of employment relationship and classification under relevant laws

7. Term and Termination: Duration of agreement and conditions for termination, including final commission payments

8. Governing Law: Specification of applicable state and federal laws governing the agreement

What sections are optional to include in a Commission Based Employment Contract?

1. Benefits Package: Details of additional benefits beyond commission structure, including health insurance, retirement plans, and other perks

2. Non-Compete Clause: Restrictions on post-employment competition and protection of business interests

3. Draw Against Commission: Terms for advanced payments against future commissions and minimum earnings guarantee

4. Confidentiality: Protection of company's confidential information and trade secrets

5. Performance Metrics: Specific performance standards and expectations beyond commission targets

What schedules should be included in a Commission Based Employment Contract?

1. Schedule A - Commission Rate Schedule: Detailed breakdown of commission rates, tiers, and qualification criteria

2. Schedule B - Territory Assignment: Definition of geographical or customer territory assignments

3. Schedule C - Sales Targets: Specific sales goals and related commission structures by period

4. Appendix 1 - Commission Calculation Examples: Sample calculations demonstrating how commissions will be computed in various scenarios

5. Appendix 2 - Required State Notices: State-specific notices and disclosures required by law

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

United States

Publisher

Genie AI

Cost

Free to use
Clauses
Industries

Fair Labor Standards Act (FLSA): Federal law governing minimum wage, overtime regulations, record-keeping requirements, and employee classification. Critical for establishing base compensation structure in commission-based agreements.

Internal Revenue Code: Federal tax regulations covering tax withholding requirements, Social Security and Medicare contributions for commissioned employees.

State Wage and Hour Laws: State-specific regulations governing wages, working hours, and labor conditions that may affect commission structures and minimum guaranteed compensation.

State Commission Agreement Laws: State-specific requirements for written commission agreements, including mandatory terms and conditions that must be included in the contract.

Title VII of the Civil Rights Act: Federal anti-discrimination law ensuring equal employment opportunities and fair treatment in commission structures regardless of protected characteristics.

Americans with Disabilities Act (ADA): Federal law requiring reasonable accommodations for disabled employees and preventing discrimination in commission opportunities.

Age Discrimination in Employment Act (ADEA): Federal law protecting workers 40 and older from age discrimination in employment, including commission-based opportunities.

Equal Pay Act: Federal law requiring equal pay for equal work, including commission structures, regardless of gender.

Commission Payment Timing Laws: State-specific regulations governing when commissions must be paid and how they are calculated and defined.

ERISA: Employee Retirement Income Security Act governing benefits plans and their administration for commissioned employees.

Affordable Care Act (ACA): Federal healthcare law with implications for benefits provision to commissioned employees based on hours worked and income.

COBRA: Federal law governing continuation of health coverage after employment termination, including specific provisions for commissioned employees.

State Termination Laws: State-specific requirements regarding final commission payments, notice periods, and other termination-related obligations.

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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