| The Michigan Sales Representatives Commission | | | | Up to this point, it has been unclear what |
| Act ("SRCA"), MCLA 600.2961, provides | | | | the word "intentional" in the Act means; |
| protection for independent sales | | | | i.e., whether it requires an act of bad faith |
| representatives from manufacturers or | | | | or simply means the withholding of a |
| suppliers who improperly refuse to pay | | | | commission on any basis other than |
| commissions for goods sold. The text of the | | | | inadvertent error or accident. Recently a |
| SRCA also requires that commissions be paid | | | | Sixth Circuit Court of Appeals decision has |
| to sales representatives on a timely basis, | | | | requested the Michigan Supreme Court to |
| leaving the definition of "timely" to the | | | | define the term "intentional" in the statute. |
| contract between the principal and the sales | | | | Though no decision has been made, should the |
| representative. However, if the contract does | | | | Michigan Supreme Court decide that the word |
| not state when the commissions are due, the | | | | intentional does not require a showing of bad |
| past practices between the parties will | | | | faith, the SRCA will continue to be a |
| control. If there are no past practices | | | | significant danger to those manufacturers and |
| between the parties, the custom and use | | | | suppliers who wish to withhold commissions |
| prevalent in the state for that business | | | | from a salesperson, even if they do it in |
| controls. | | | | good faith. Until the Michigan Supreme Court |
| | | | rules on this question, manufacturers and |
| According to the SRCA, if a sales | | | | suppliers should operate with caution as they |
| representative's contract is terminated, all | | | | may be liable for the double damages even if |
| commissions that are due at the time of the | | | | they withhold commissions based on a good |
| termination must be paid within 45 days after | | | | faith disagreement with the sales |
| the date of termination. If commissions | | | | representative. |
| become due after the termination date of the | | | | |
| contract, they must be paid within 45 days | | | | At a minimum, though, manufacturers should |
| after the date in which they became due. | | | | make sure that the contract with their sales |
| These requirements are set in stone, so to | | | | representatives explicitly set forth when and |
| speak, by the SRCA and cannot be waived by | | | | under what circumstances a commission is |
| individual contracts. | | | | going to be paid. In a situation in which a |
| | | | part of a commission is disputed and another |
| Under SRCA, a manufacturer or supplier who | | | | is not, the undisputed part should be paid so |
| fails to comply with the law for timely | | | | as to minimize damages. |
| payment of commissions is responsible for | | | | |
| actual damages for failure to pay the | | | | Should a decision be made to not pay a |
| commissions. Additionally, if the | | | | commission, manufacturers and suppliers |
| manufacturer or supplier is found to have | | | | should fully document their reasons for |
| "intentionally" failed to pay the commissions | | | | withholding it. This will allow them to more |
| when due, the sales representative is | | | | easily make the argument that the commissions |
| entitled to two times the amount of the | | | | were not owed to the sales representative if |
| commission or $100,000, whichever is less. If | | | | the sales representative later files suit for |
| the sales representative files a lawsuit | | | | those commissions. If there are significant |
| pursuant to the SRCA, the court is also | | | | dollars involved, it may be wise for the |
| required to award the prevailing party | | | | parties to a commission dispute to consult |
| reasonable attorneys' fees and court costs. | | | | legal counsel early in the dispute process. |
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