Florida Commission Agreements: When Is a Commission Earned?
Commission disputes rarely begin with disagreement over the percentage. They usually begin with a more basic question: when did the employee earn the commission?
A salesperson may believe the commission was earned when the customer signed. The employer may treat it as earned only after delivery, collection, expiration of a cancellation period, or completion of post-sale services. If the employee resigns or is terminated before the final step, the plan’s language can determine whether a substantial payment remains due.
Florida employers that use commissions should address these issues in a written plan before a dispute arises. Employees should understand the same terms before relying on projected compensation.
Separate “Earning” From “Payment”
A commission can be earned on one date and payable on another. Those concepts should not be collapsed.
The earning provision identifies the event that creates the employee’s right to compensation. Depending on the business, that event may be execution of a contract, acceptance of an order, shipment, installation, payment by the customer, expiration of a rescission period, or completion of specified services.
The payment provision establishes when the employer will calculate and issue the amount after it has been earned. Payment may occur in the next payroll cycle, after month-end reconciliation, or after receipt of customer funds.
A plan that says only that commissions are “paid after collection” may not clearly establish whether collection is a condition to earning the commission or simply the date on which an already-earned commission becomes payable. Precision matters most when employment ends between the sale and collection.
Florida Cases Focus on the Agreement and the Work Performed
Florida appellate decisions recognize a general rule that termination does not automatically forfeit commissions earned before termination, while also recognizing that the parties’ agreement or established custom may condition earning on additional performance.
In Cornell Computer Corp. v. Damion, 530 So. 2d 497, 498–99 (Fla. 3d DCA 1988), the Third District explained that an employee generally is entitled to commissions earned during employment unless the parties’ contract or established custom provides otherwise, or unless the employee must complete additional services before the right arises. The court reversed a judgment that had failed to account for evidence concerning the parties’ agreement and practices.
Similarly, Van Dusen v. Single Ply International, Inc. of Florida, 545 So. 2d 960, 960 (Fla. 5th DCA 1989), held that an employee’s termination did not eliminate commissions allegedly earned through pre-termination sales merely because the underlying jobs began later.
Citigroup Realty, Inc. v. Valdes, 8 So. 3d 383, 385–86 (Fla. 3d DCA 2009), illustrates why factual development matters. The court found a genuine dispute concerning the terms of an oral commission agreement and reversed summary judgment. The decision did not establish that every post-termination commission is payable. It confirmed that the actual agreement, custom, and required services may control.
The drafting lesson is straightforward: a business should not expect a court to supply detailed earning rules that the compensation plan omitted.
Define the Transaction That Generates a Commission
Commission plans should identify the types of transactions that qualify. Questions to address include:
Does the employee receive credit for a lead, an introduction, a signed contract, or a completed sale?
How are team sales, house accounts, renewals, upsells, and transferred accounts treated?
Who receives credit when several employees contribute?
Does the commission apply to gross revenue, net revenue, gross profit, or another measure?
Which taxes, discounts, credits, returns, freight charges, or pass-through expenses are excluded?
How are multi-year contracts and recurring revenue allocated?
What happens when the customer pays in installments?
The plan should include examples that match the company’s actual sales cycle. Examples are not a substitute for operative language, but they can expose ambiguity before compensation is calculated.
Address Cancellations, Refunds, and Chargebacks
Businesses often need a mechanism for transactions that are cancelled, refunded, written off, or materially reduced. A chargeback provision should state when a prior credit may be reversed, whether the employee must repay money already received, and whether the adjustment may be offset against future commissions.
The distinction between an unearned advance and an earned wage can become important. A plan should not label every future adjustment a “chargeback” without explaining the contractual basis. It should also address situations outside the employee’s control, such as a company decision not to perform, a product shortage, billing error, disputed collection practice, or unilateral price concession.
Clear records are essential. Each statement should identify the transaction, commission base, rate, adjustments, and resulting amount. An unexplained negative balance is an invitation to dispute.
State What Happens at Termination
A commission plan should expressly address voluntary resignation, termination without cause, termination for misconduct, death or disability, transfer to another role, and expiration of a fixed-term agreement.
The plan should identify:
Which transactions remain eligible after employment ends.
Whether continued employment on a payment date is required and, if so, whether that condition applies to earned compensation or only a discretionary incentive.
What post-sale work must be completed.
Who will complete that work if the employee is no longer employed.
How pending transactions will be tracked and reported.
Whether later cancellations or refunds can affect a final payment.
The method and timing for a final accounting.
A broad statement that “all commissions are forfeited at termination” may generate more litigation than certainty, particularly where the employee contends the compensation was already earned. The plan should tie any condition to the actual services and business purpose involved.
Distinguish Commissions From Discretionary Bonuses
Not every variable payment is a commission. A commission typically relates compensation to sales, revenue, profit, or transactions. A bonus may reward company performance, individual goals, retention, discretion, or a combination of factors.
The label is not controlling. The plan should state whether the payment is formula-based or discretionary, what conditions apply, and whether the employer retains authority to modify future opportunities. An employer should avoid describing a payment as guaranteed in one document and discretionary in another.
For nonexempt employees, the characterization also may affect overtime calculations. Under the Fair Labor Standards Act, commissions and many nondiscretionary bonuses generally must be included in the employee’s regular rate, subject to applicable exclusions, exemptions, and allocation rules. See 29 C.F.R. §§ 778.117–.119 (2026). A compensation plan should be coordinated with payroll so that variable compensation is allocated to the correct workweeks and any additional overtime is calculated.
Do Not Assume a Commission Plan Creates an Overtime Exemption
Paying an employee by commission does not, by itself, eliminate overtime obligations. Exemptions depend on statutory and regulatory criteria, not the compensation label alone.
Some commissioned employees of qualifying retail or service establishments may fall within the exemption in 29 U.S.C. § 207(i), but the employer must satisfy the provision’s requirements, including compensation and regular-rate conditions. Other employees may qualify under different exemptions based on duties and pay structure. Many will remain nonexempt.
Employers should determine classification separately from commission design. A strong commission plan cannot cure an incorrect exemption analysis.
Use Written Amendments Prospectively
Businesses change commission structures as products, territories, pricing, and sales roles evolve. The plan should explain how amendments are adopted, when they take effect, and how transactions already in the pipeline will be treated.
Retroactive changes are particularly likely to create disputes. A revised plan should state whether it applies to leads generated, contracts signed, revenue received, or work performed after the effective date. Employees should acknowledge receipt, and the company should preserve prior versions.
Oral assurances from managers can also create factual disputes. Supervisors should not improvise exceptions without authority, and any approved exception should be documented.
Prepare for a Wage Claim Before One Exists
Florida does not have a single comprehensive wage-payment code governing every commission dispute, so claims may arise under contract, federal law, local ordinances, or other applicable theories. Section 448.08, Florida Statutes, permits a court to award costs and reasonable attorney’s fees to the prevailing party in an action for unpaid wages. Fla. Stat. § 448.08 (2026). The availability and characterization of a particular claim remain fact-dependent.
The best defense is a compensation system that can be reconstructed. Employers should retain signed plans, amendments, sales records, customer-payment data, calculations, statements, and communications concerning exceptions. Employees should preserve their own agreements and statements rather than rely solely on access to systems that may end at termination.
A Commission Plan Should Be an Operating Document
The commission agreement must work for sales, finance, payroll, and management—not merely read well when signed. Before implementation, the company should test the plan against ordinary scenarios: a partial refund, split account, late payment, customer default, employee transfer, disputed lead, termination during a long sales cycle, and a transaction completed after departure.
Ambiguity is expensive because it affects both compensation and trust. A carefully drafted plan tells the employee what must occur, tells payroll how to calculate it, and gives the company a defensible record if the relationship ends.
Learn more about Equity Legal’s business and employment-related contract services at https://www.equitylegalfirm.com/corporate.
Equity Legal, PLLC advises Florida businesses concerning commission plans, employment agreements, contractor agreements, compensation policies, and related contract issues. The firm’s flat-fee legal packages include defined-scope options for business agreements and employment documents. Review the available flat-fee packages at https://www.equitylegalfirm.com/copy-of-flat-fee-packages or contact info@equitylegalfirm.com.
This article is for general informational purposes only and does not constitute legal advice. Reading it does not create an attorney-client relationship.
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