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Sales Commission Agreement for the United States

Sales Commission Agreement Template for United States

A Sales Commission Agreement is a legally binding contract used in the United States that establishes the terms and conditions under which a sales representative will be compensated for successful sales. The agreement outlines commission rates, payment terms, sales territories, and performance expectations while ensuring compliance with federal and state labor laws, including FLSA requirements and state-specific commission regulations.

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Sales Commission Agreement

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What is a Sales Commission Agreement?

The Sales Commission Agreement serves as a critical document for businesses operating in the United States that rely on commission-based sales structures. This agreement establishes clear parameters for sales compensation, helping prevent disputes and ensuring compliance with federal and state regulations. It's particularly important in industries where significant portions of compensation are commission-based, and it helps protect both the employer's interests and the sales representative's rights to earned commissions. The document typically includes detailed commission structures, payment schedules, performance metrics, and territory definitions, while addressing both federal requirements and state-specific commission payment laws.

What sections should be included in a Sales Commission Agreement?

1. Parties: Identifies and defines the parties to the agreement - typically the company and the sales representative

2. Background: Sets out the context and purpose of the agreement

3. Definitions: Defines key terms used throughout the agreement

4. Appointment and Scope: Establishes the sales representative's role and territory/market

5. Commission Structure: Details the commission rates, calculation methods, and qualifying sales

6. Payment Terms: Specifies when and how commissions will be paid

7. Obligations of the Parties: Lists responsibilities of both the company and sales representative

8. Term and Termination: Specifies duration and conditions for ending the agreement

9. Governing Law: Specifies which jurisdiction's laws govern the agreement

What sections are optional to include in a Sales Commission Agreement?

1. Non-Compete: Restricts representative from working with competitors (use when protecting market share or sensitive information)

2. Confidentiality: Protects company's confidential information (use when representative will have access to sensitive information)

3. Performance Targets: Sets minimum sales targets or quotas (use when specific performance levels are required)

4. Training Requirements: Specifies required training or certifications (use when specific product knowledge or skills are needed)

5. Expense Reimbursement: Details which expenses are reimbursable (use when representative incurs business expenses)

What schedules should be included in a Sales Commission Agreement?

1. Commission Rate Schedule: Detailed breakdown of commission rates and tiers

2. Territory Map: Geographic or market definition of sales territory

3. Product List: List of products/services covered by the agreement

4. Sales Targets: Detailed performance metrics and quotas

5. Expense Policy: Detailed policy on reimbursable expenses and procedures

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok成人版 | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

United States

Document Type

Agreement Contract

Cost

Free to use
Clauses






























Industries

Fair Labor Standards Act (FLSA): Federal law establishing minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in federal, state, and local governments

Federal Insurance Contributions Act (FICA): Federal law requiring the collection of Social Security and Medicare taxes from both employers and employees, which must be considered when structuring commission payments

Federal Unemployment Tax Act (FUTA): Federal law requiring employers to pay unemployment taxes that fund unemployment compensation for workers who lose their jobs

Internal Revenue Code: Federal tax regulations governing the taxation of commission payments, including withholding requirements and tax reporting obligations

State Labor Laws: Various state-specific regulations governing employment relationships, wage payments, and commission structures that vary by jurisdiction

State Unemployment Insurance Requirements: State-specific regulations requiring employers to contribute to state unemployment insurance funds based on employee wages and commissions

Independent Contractor Classification: IRS guidelines and state-specific tests for determining whether a commissioned salesperson should be classified as an employee or independent contractor

Commission Payment Timing Laws: State-specific requirements regarding the timing and frequency of commission payments, including rules for post-termination commissions

Statute of Frauds: Legal requirement that certain contracts, including those that cannot be performed within one year, must be in writing to be enforceable

Uniform Commercial Code: Standardized set of business laws regulating commercial transactions, which may apply to commission agreements related to sale of goods

Equal Pay Act: Federal law requiring equal pay for equal work, which must be considered when structuring commission plans to avoid discriminatory practices

Title VII of the Civil Rights Act: Federal law prohibiting employment discrimination based on race, color, religion, sex, and national origin, applicable to commission structure and implementation

Uniform Trade Secrets Act: Law protecting business trade secrets, relevant for including confidentiality provisions in commission agreements

State Non-Compete Laws: State-specific regulations governing the enforceability of non-compete clauses that may be included in commission agreements

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks, 聽Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination, 聽Severance Pay, Governing Law, Entire Agreemen

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