Trusted trial counsel in heart of Brooklyn and Upper Manhattan
Stoll Glickman & Bellina Logo

Unlawful Deductions Under New York Law: Four Key Protections Every Commissioned Salesperson Should Know

In the Brooklyn area, there are new businesses sprouting up at a rapid fire pace.  Many of these business are in industries with a heavy reliance on sales professionals, and compensation is often based purely on a percentage of the revenue reaped on the employees’ sales, otherwise know as pure commission-based employment.  This commissioned sales force includes travel agents, car salesmen, real estate agents, stock brokers, insurance agents, wholesale manufacturing agents, and cash advance or pre-settlement funding companies.

Jobs with the potential to earn commission can be exciting and profitable if you have what it takes to make it in sales: an outgoing personality, business savvy, and above all, an in-depth knowledge of the product you have been asked to pedal.  And while you may wait eagerly for your well-earned commission check to arrive at your desk, beware that your take home pay may not be what you expected.  As you look through your pay stub you will invariably see lawfully withheld state and federal tax deductions, however, other deductions may cause you to look twice.

Most likely, your employer knows exactly what he or she can legally deduct from your commission wages, but all too often, these boundaries are ignored.  Although your employer cannot deduct money from your commissioned wages after they have been earned, this scenario routinely happens to unsuspecting employees.  A word to the wise – be wary of suspicious deductions; know which are legal and which are not. The reasons for cash deductions are usually listed on your pay stub and reveal where your employer may have spent the deducted cash, perhaps to recover office management costs, fixture repairs, credit card processing fees, or other expenses associated with operating the enterprise.  Overwhelming precedent in New York has found that such deductions are illegal.

If you are unsure of the terms of your commission compensation arrangement, be sure to review the written agreement that you have signed with your employer.  In New York State, every employee who is paid a commission must, by law, have a written agreement defining essential terms of the compensation arrangements. Even if no such writing exists, you may still have remedies if illegal deductions are taken out of your earned pay.  So what can your employer deduct from your commission paycheck? According to New York Labor Law, the following are key protections (albeit not an exhaustive list):

·         1.  All deductions must be voluntary and authorized in writing by the employee;

·         2.  All deductions must be for the benefit of the employee. For example, authorized deductions can pay for healthcare benefits, pensions, contributions to charitable organizations, tuition payments, U.S. savings bonds, etc.; 

·         3.  Deductions made relating to an accidental overpayment of wages must be made known to the employee before deductions take place and the employer must have a procedure for recovering this money; 

4.    All draws against your commission must be reconciled against future earnings and cannot be recouped from past earnings, even if your employment has been terminated.

Whether in Brooklyn or elsewhere New York City or the Tri-State area, if you are a member of the commissioned sales force and are skeptical of certain deductions that have been taken from your wages, you should read the New York Labor Law and become aware of your rights. You may be surprised to learn that your employer has been untruthful with you.  Further, if you are making a draw but your draw is not guaranteed from week to week (otherwise known as a “guaranteed draw”) and if your commission wages drop below the state or federal minimum wage give the hours your worked in a workweek, you also will have legal claims for your employers failure to guarantee you the minimum wage for all of your hours.  If this is the case, find a lawyer who has experience recovering unpaid wages and can stand by you to right this wrong.








Christopher Davis is an experienced employment litigator specializing in class actions, overtime wage recovery, discrimination, whistleblower retaliation, and Wall Street bonus disputes. Before entering private practice, Mr. Davis served as an Assistant District Attorney in the Manhattan District Attorney's Office where he prosecuted violent crimes as a member of the Sex Crimes Unit.

Leave a Reply