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