New York Commissioned Employee Laws: Pay Rights and Protections (2025)
If you work on commission in New York, your employer must follow strict wage laws. New York Labor Law treats commissions as wages once they’re earned, which means your employer cannot take them away arbitrarily or withhold them without legal justification. The law requires written commission agreements that clearly explain how you earn commissions and when you get paid. Whether you’re in sales, real estate, or any other commission-based role, understanding New York commissioned employee laws protects your right to the compensation you’ve earned.
Commissions Are Wages Under New York Law
New York Labor Law Section 190 defines commissions as wages when they’re earned according to your employment agreement. This classification gives commissions the same legal protections as hourly wages or salaries.
Once you’ve earned a commission under the terms of your agreement, your employer must pay it. They cannot arbitrarily decide not to pay, change the terms retroactively, or create new conditions that prevent you from receiving money you’ve already earned.
The practical impact is significant. If your employer fails to pay earned commissions, you can file a wage claim with the New York Department of Labor (NYDOL) or pursue a lawsuit. The same penalties that apply to unpaid hourly wages apply to unpaid commissions, including potential liquidated damages equal to 100% of what you’re owed.
New York courts have consistently ruled that earned commissions cannot be forfeited, even if you leave the company or are terminated. The key question is always whether the commission was “earned” according to your agreement.
Written Commission Agreement Required
New York Labor Law Section 191(1)(c) requires employers to provide a written commission agreement before you start working on commission. This isn’t just a recommendation—it’s a legal requirement.
Your written agreement must specify:
- How commissions are calculated (percentage of sales, flat fee per transaction, tiered structure, etc.)
- When commissions are considered earned (at sale, when customer pays, after delivery, etc.)
- When commissions will be paid (weekly, monthly, quarterly, etc.)
- Any conditions that affect commission payment (return policies, customer payment requirements, minimum performance thresholds)
If your employer fails to provide a clear written agreement, New York courts typically interpret ambiguities in your favor. This means if there’s any dispute about how commissions should be calculated or when they’re earned, the interpretation that benefits you as the employee generally prevails.
The written agreement requirement protects both parties. You know exactly what you need to do to earn commissions, and your employer has clear documentation of the terms they agreed to pay.
When Are Commissions “Earned”?
The critical question in most commission pay laws New York disputes is when a commission becomes “earned.” This determines when it transforms from a potential future payment into wages that legally belong to you.
The answer depends entirely on your written commission agreement. Common standards include:
At the point of sale: You earn the commission when the customer signs the contract or places the order, regardless of whether they pay or the product is delivered.
When the customer pays: You earn the commission only after the customer makes payment to the company. This protects employers from paying commissions on sales that never generate revenue.
When service is completed: For service-based businesses, you might earn the commission after you deliver the service or complete the project.
After the return period expires: Some agreements specify that commissions are earned only after the customer’s ability to return the product or cancel the service ends.
Clear definitions prevent disputes. If your agreement says you earn commissions “at sale,” your employer cannot refuse to pay because the customer hasn’t paid yet. If it says “when customer pays,” you must wait for payment before the commission is earned.
Without a clear written standard, New York courts often apply the most employee-favorable interpretation based on industry custom and the nature of your work.
Cannot Forfeit Earned Commissions
One of the strongest protections in commissioned employee rights NY is the rule against forfeiting earned commissions. Once a commission is earned under your agreement, your employer cannot take it away.
This protection applies even if:
- You’re terminated: Being fired doesn’t void commissions you already earned. Your employer must include all earned commissions in your final paycheck.
- You quit: Leaving voluntarily doesn’t forfeit earned commissions. You’re entitled to payment of all commissions earned before your departure.
- The company changes policies: New commission structures or policies cannot retroactively eliminate commissions you already earned under the old terms.
- You don’t meet future performance goals: A commission earned in January cannot be taken away because you missed quota in March.
Many employment agreements include “forfeiture clauses” that attempt to void unpaid commissions if you leave the company. New York courts frequently find these clauses unenforceable when they attempt to take away commissions that were already earned.
For example, if you close a $100,000 sale in March and your agreement says commissions are “earned at sale,” your employer cannot refuse to pay that commission in April just because you gave notice or were terminated. The commission was earned in March and is now your wages.
The exception is commissions not yet earned. If your agreement requires customer payment before earning, and the customer hasn’t paid when you leave, that commission may not be owed yet.
Timing of Commission Payment
New York Labor Law requires regular payment of wages, but commission payment timing can be more flexible than hourly wages if your written agreement specifies the schedule.
Standard payment schedules include:
Same as regular wages: Many employers pay commissions with your regular paycheck, following the same weekly or bi-weekly schedule as your base pay (if any).
Monthly: It’s common for commissions to be paid monthly, particularly when they require calculation time or verification of completed sales.
Quarterly: Some industries pay commissions quarterly, especially for large or complex sales that take time to finalize.
Whatever schedule your agreement specifies, your employer must follow it consistently. They cannot arbitrarily delay commission payments beyond the agreed schedule.
Final paycheck requirements are critical. When your employment ends, all earned commissions must be included in your final paycheck, which is due:
- By the next regular payday if you quit
- By the next regular payday if you’re fired
Some employers mistakenly believe they can wait until the next regular commission payment date to pay earned commissions after termination. This violates New York law. Earned commissions are wages and must be paid with your final paycheck.
Draw Against Commission
A “draw” is an advance payment against future commissions. New York law recognizes two types:
Recoverable draw: Your employer advances you money with the expectation that future commissions will pay it back. If your commissions don’t cover the draw, you may owe the difference back to the employer.
Non-recoverable draw: Your employer guarantees you a minimum payment regardless of commissions earned. If commissions fall short, you keep the full draw amount without repayment obligation.
Whether a draw is recoverable or non-recoverable must be clearly stated in your written agreement. If your agreement is silent or ambiguous, courts often find the draw is non-recoverable, favoring the employee interpretation.
Important limitation: Even with a recoverable draw, your employer cannot reduce your pay below minimum wage to recoup the advance. Minimum wage protections always apply.
For example, if you’re paid a $2,000 monthly draw against commission but only earn $1,500 in commissions that month, your employer can only recoup the $500 difference if:
- Your agreement specifically allows recoverable draws
- The recoupment doesn’t bring you below minimum wage for all hours worked
Many draw agreements that seem to favor employers end up being unenforceable because they fail to clearly document the terms or attempt to violate minimum wage requirements.
Commissioned Employees and Overtime
Most people assume commissioned employees don’t get overtime. This is wrong. Under both federal (FLSA) and New York law, most commissioned employees are entitled to overtime pay for hours over 40 in a workweek.
The overtime exemption for commissioned employees is narrow and applies only to:
Outside sales employees: Workers who regularly make sales away from the employer’s place of business and spend more than 50% of their time on sales activities. True outside sales representatives are exempt from overtime.
Retail commissioned employees: Workers employed by retail or service establishments who earn more than half their compensation from commissions and whose regular rate of pay exceeds 1.5 times the minimum wage. This is a difficult standard to meet, and many retail workers who think they’re exempt actually aren’t.
If you don’t meet one of these specific exemptions, you’re entitled to overtime at 1.5 times your regular rate for all hours over 40 per week, even if you’re paid entirely on commission.
Common scenarios where can employer withhold commissions New York becomes an overtime issue:
- Car salespeople working 50-60 hour weeks (usually entitled to overtime)
- Inside sales representatives making calls from the office (entitled to overtime)
- Real estate agents who show properties but also do office work (often entitled to overtime)
- Commission-based retail workers earning less than required threshold (entitled to overtime)
Your employer cannot avoid overtime obligations simply by calling you “commissioned” or paying you only commission without hourly wages.
Calculating Overtime for Commissioned Employees
When non-exempt commissioned employees work overtime, calculating the overtime rate becomes complex because commissions must be included in the “regular rate” of pay.
Here’s how it works:
Step 1: Calculate total compensation for the week (hourly wages + commissions earned that week)
Step 2: Divide by total hours worked to get the regular rate
Step 3: Calculate overtime at 0.5 times the regular rate (you already received 1x in your commission payment)
Example calculation:
You work 50 hours in a week. You earn $15/hour base pay plus commissions. This week you earned $2,000 in commissions.
- Base pay: $15 × 50 hours = $750
- Commission: $2,000
- Total compensation: $2,750
- Regular rate: $2,750 ÷ 50 hours = $55/hour
- Overtime premium due: $55 × 0.5 × 10 overtime hours = $275
- Total pay owed: $2,750 + $275 = $3,025
Many employers fail to properly calculate overtime for commissioned employees, simply paying commissions without the additional overtime premium. This results in systematic wage violations that can add up to substantial amounts over time.
If you work overtime hours and earn commissions, review whether your employer is properly including commissions in your regular rate calculation. If not, you may have a significant wage claim.
Minimum Wage Protections
Even if you work entirely on commission, New York minimum wage laws still apply. In 2025, New York’s minimum wage ranges from $15.00 to $16.50 per hour depending on location (higher in New York City and surrounding counties).
Your employer must ensure that your commission earnings, when divided by your hours worked, equal at least minimum wage. If they don’t, your employer must make up the difference.
Example:
You work 40 hours in a week and earn $400 in commissions. The minimum wage in your area is $15/hour.
- Minimum wage owed: $15 × 40 = $600
- Commission earned: $400
- Shortage: $200
- Your employer must pay an additional $200 to bring you to minimum wage
This protection prevents employers from having employees work long hours on commission with no guarantee of minimum earnings. If you’re consistently earning below minimum wage, your commission structure may violate New York law.
Some employers try to average earnings over longer periods (monthly or quarterly) to show compliance. However, New York’s preference is workweek-by-workweek analysis. Each week must meet minimum wage requirements independently.
Chargebacks and Clawbacks
A “chargeback” or “clawback” occurs when an employer takes back a commission already paid. New York law strictly limits when employers can do this.
Chargebacks are only allowed when:
- Your written agreement specifically authorizes them for defined circumstances
- The reason for the chargeback is legitimate and falls within the agreement’s terms
- The chargeback doesn’t reduce your pay below minimum wage
Common legitimate chargeback reasons:
- Customer returns the product within the specified return period (if your agreement says commissions are earned after return period)
- Customer cancels the service before completion (if agreement conditions commission on completion)
- Fraudulent sale you knowingly participated in
Illegitimate chargeback reasons:
- Customer fails to pay (unless your agreement clearly makes commission contingent on payment)
- Customer files bankruptcy
- General business losses or company financial problems
- Your performance declines in later periods
- You leave the company
Many employers attempt blanket chargebacks for customer non-payment. Unless your agreement explicitly conditions commission on customer payment, this violates New York law. Your employer takes the credit risk when they sell on credit, not you.
If your employer deducts chargebacks from your paycheck, verify that:
- The written agreement authorizes the specific type of chargeback
- The situation falls within the authorized categories
- The deduction doesn’t bring you below minimum wage
- The commission wasn’t already “earned” under your agreement’s definition
Unauthorized chargebacks are wage theft and can be recovered through NYDOL or a lawsuit.
Changing Commission Terms
Your employer has the right to change commission structures going forward, but they cannot retroactively change how you earn commissions on work already performed.
Allowed:
- Announcing that starting next month, the commission rate changes from 10% to 8%
- Implementing a new commission structure for sales made after a specific date
- Changing territory assignments or account responsibilities going forward
Not allowed:
- Reducing the commission rate on sales you already closed
- Changing the “earned” definition to void commissions you already earned
- Applying new, more restrictive terms to past performance
- Creating new conditions for payment of earned commissions
The key distinction is the “earned” date. Once a commission is earned under the existing terms, those terms are locked in for that specific commission. New terms apply only to future opportunities to earn.
Example scenario:
In January, your agreement says you earn 10% commission “at sale.” You close $100,000 in sales in January, earning $10,000 in commission. In February, your employer changes the commission rate to 8% and changes the earning point to “when customer pays.”
Result: You’re owed $10,000 for January sales under the old 10% rate, paid at the old timing, regardless of when customers pay. February sales are subject to the new 8% rate earned when customers pay.
Employers sometimes try to condition earned commissions on continued employment or compliance with new policies. These retroactive conditions generally violate New York law.
If your employer announces commission changes, get the new terms in writing and clarify exactly when they take effect. Document all sales and work performed under the old terms to protect your earned commissions.
Recovering Unpaid Commissions
If your employer fails to pay earned commissions, you have several options to recover what you’re owed.
File a wage claim with the New York Department of Labor:
- No attorney required
- No filing fee
- NYDOL investigates and can order payment
- Process typically takes several months
- Available at labor.ny.gov
File a lawsuit:
- Can recover up to 6 years of unpaid commissions (statute of limitations)
- Can recover liquidated damages equal to 100% of unpaid amount
- Can recover attorney’s fees if you win
- Faster resolution possible
- Allows for jury trial
Key advantages of legal action:
New York Labor Law places the burden of proof on your employer. Once you show you performed work for which commissions were promised, your employer must prove either that:
- The commission wasn’t earned under the agreement terms
- The commission was paid
- A legitimate exception applies
This burden-shifting is powerful. Your employer must produce records and documentation justifying non-payment. If they cannot, you win.
Liquidated damages mean you can recover double the unpaid amount. If you’re owed $10,000 in commissions, you can recover $20,000 plus attorney’s fees. This penalty incentivizes employers to pay correctly and compensates you for the delay and hassle of recovering your wages.
Document everything:
- Save your written commission agreement
- Keep records of sales, transactions, or work that earned commissions
- Document all communications about commission disputes
- Track hours worked (important for minimum wage and overtime analysis)
- Save pay stubs showing partial or missing commission payments
The 6-year statute of limitations is significantly longer than the 3-year limit for most contract claims. This extended period recognizes that wage violations often continue over time and workers may not immediately realize their rights are being violated.
When to Seek Legal Help
Commission disputes can be complex, involving detailed agreement interpretation, calculation issues, and overlapping wage and hour violations. Consider consulting an employment attorney if:
- Your employer refuses to pay significant earned commissions
- You’re unsure whether commissions are “earned” under your agreement
- Your employer implemented chargebacks you believe are improper
- You work overtime but receive no overtime premium on commissions
- Your commission earnings regularly fall below minimum wage
- Your employer changed commission terms and you’re uncertain about retroactive application
- You were terminated and your final paycheck excluded earned commissions
Many employment attorneys handle commission cases on contingency, meaning you pay nothing unless you recover money. Given that New York law allows recovery of attorney’s fees, legal help is often accessible even for workers with limited resources.
Understanding New York commissioned employee laws empowers you to recognize violations and take action. Commissions are not gifts or bonuses—they’re wages you’ve earned through your work. New York law protects your right to receive every dollar you’ve legitimately earned under your commission agreement.
For more information about wage protections in New York, see our comprehensive guide to New York Wages and Hours laws or learn about recovering unpaid wages in New York.
Legal Disclaimer: This article provides general information about New York employment law and is not legal advice. Commission agreements and wage situations vary significantly. For advice about your specific circumstances, consult with a qualified New York employment attorney.
References
- New York Labor Law § 190 (Definition of wages)
- New York Labor Law § 191 (Frequency of payments, commission agreements)
- New York Labor Law § 193 (Deductions from wages)
- New York Labor Law § 198 (Liquidated damages for wage violations)
- 12 NYCRR § 142 (Minimum wage orders)
- Fair Labor Standards Act § 207 (Overtime provisions)
- Fair Labor Standards Act § 213(a)(1) (Outside sales exemption)