Unpaid Commission After Resignation

Below is a comprehensive discussion on the topic of unpaid commissions after resignation under Philippine law. This overview covers the nature of commissions, applicable labor and civil law principles, jurisprudential guidelines, and practical remedies available to a resigned employee seeking payment of outstanding commissions.

1. Definition of “Commission” Under Philippine Law

  1. Nature of Commissions

    • Payment for results: A commission is typically a sum of money paid to an employee upon the completion of a task, specifically tied to a sale or other performance-based metrics.
    • Form of wage or compensation: Depending on the agreement between the parties, the Supreme Court of the Philippines has repeatedly ruled that commissions can be considered part of an employee’s wages if they are made a part of the compensation package for work done.

  2. Basis and Agreement

    • Employment contract or company policy: The specific arrangement for commissions is usually spelled out in an employment contract or in a company’s internal policy or handbook.
    • Sales or performance targets: Payment is often triggered when the employee has met certain sales quotas or performance criteria.
    • Governing documents and proof: To claim commissions, one typically refers to the employment contract, job offer letter, or company policy that explicitly describes how commissions are calculated and when they become due.

2. Legal Framework Affecting Commissions

  1. Labor Code of the Philippines

    • General rule on wages: Under Article 97(f) of the Labor Code, “wage” refers to the remuneration for work done, which may include commissions if agreed upon as part of the pay scheme.
    • Time of payment: Article 103 of the Labor Code provides that wages (including any component considered part of wages) must be paid at least once every two (2) weeks or twice a month at intervals not exceeding sixteen (16) days.
    • Final pay: Although the Labor Code does not explicitly discuss “commissions after resignation,” it does require employers to pay employees all final wages due within a reasonable time (commonly interpreted as within thirty [30] days from the final date of employment under Department of Labor and Employment [DOLE] guidelines).

  2. Civil Code of the Philippines

    • Obligations and contracts: Commissions also have a contractual component, governed by the Civil Code provisions on obligations and contracts. If an agreement clearly states that commissions form part of compensation earned upon achieving specific results, the obligation to pay them arises once the stipulated conditions are met.
    • Good faith in contractual dealings: Parties must observe fairness and good faith in the fulfillment of contractual obligations. An employer withholding due commissions without legal basis may be in breach of contract.

3. Are Commissions Considered Wages?

  1. General Principle

    • Commissions can be part of an employee’s wages if they are guaranteed and linked to performance of specific tasks or sales targets. This inclusion as “wage” affords commissions the same labor law protections as a basic salary.

  2. Effects of Being Classified as Wages

    • Payment upon resignation or separation: If commissions are part of wages, they must be paid as part of an employee’s final pay.
    • No forfeiture without basis: In general, wages (including commissions classified as wages) cannot be forfeited merely because the employee resigned, unless there is a clear and valid contractual stipulation or policy that unambiguously states they are contingent upon continued employment at the time of crediting or payment.

  3. Exceptions

    • Contingent or discretionary commissions: Some commission structures are purely discretionary or contingent upon the employer’s complete discretion (e.g., annual or performance bonuses that are not guaranteed). Such commission plans often require that the employee remain in service on a specific “pay-out date.”
    • Written policies or specific agreements: An employer can stipulate, for example, that the employee must be “active” or “employed on the date of payment” to be entitled to the commission. When such clauses are validly set forth in a contract or policy, an employee’s entitlement to commissions may be limited if they resign before the pay-out date.

4. Entitlement to Commissions Upon Resignation

  1. Key Question: When Are Commissions Earned?

    • Under Philippine jurisprudence, once the employee fulfills the conditions for earning a commission (e.g., successfully closing a sale, meeting a target, or other triggers as stated in the contract), the right to that commission vests.
    • The typical legal test is whether the employee “completed the work required for entitlement.” If the employee has substantially performed or delivered the sale prior to resignation, then the commission is generally considered earned.

  2. Employer Policies vs. Labor Standards

    • An employer may have a policy requiring employees to be actively employed as of the date of the commission payout. Such policies must be clearly communicated and must not be unconscionable or in violation of law.
    • If the policy is ambiguous, courts typically construe ambiguity in favor of the employee, especially when commissions are integral to the wage structure.

  3. Final Pay Practices

    • Typical deadlines: The DOLE, in practice and through various circulars, advises that an employer should release final wages (including earned commissions) within thirty (30) days from the last day of employment.
    • Documentary requirements: Employees may need to comply with clearance processes (e.g., returning company equipment) for the employer to process the final pay. However, undue delay or withholding of commissions purely because of clearance formalities may be questioned if it surpasses a reasonable period.

5. Legal Remedies If Commission Is Unpaid After Resignation

  1. Demand Letter

    • The first step is usually to send a formal written demand to the employer. This letter should:
      • Identify the amounts claimed,
      • Cite the basis (e.g., employment contract, commission structure, or final pay guidelines), and
      • Request release of the unpaid amount within a specific timeframe.

  2. Filing a Complaint with the Department of Labor and Employment (DOLE)

    • If the employer fails to respond or refuses to pay, the resigned employee may file a labor complaint for recovery of wages (which includes unpaid commissions deemed as wages) with the DOLE’s Regional Office or the National Labor Relations Commission (NLRC).
    • Single Entry Approach (SEnA): Before proceeding to a formal case, parties typically undergo a 30-day mandatory conciliation-mediation at DOLE to attempt an amicable settlement.

  3. National Labor Relations Commission (NLRC)

    • If conciliation fails, the employee can file a complaint before the NLRC.
    • The employee can claim not only the unpaid commissions but also legal interest, attorney’s fees (if justified), and other damages if the withholding is proven to be in bad faith.

  4. Court Action

    • If the complaint involves purely civil or contractual issues (for instance, if the commission plan is wholly separate from wage compensation or the amounts exceed labor arbiters’ jurisdiction), the matter could be pursued as a civil case under regular courts. However, more commonly, disputes over commissions as wages fall within labor arbiters’ jurisdiction if they arise from an employer-employee relationship.

6. Jurisprudence and Examples

  1. Commission as Part of Salary

    • The Supreme Court, in various rulings, has reiterated that where the compensation package explicitly identifies commissions as an integral component of salary, those commissions are protected as wages.

  2. When Commission Is Earned

    • In a number of cases, the High Court has held that once the employee has completed the act upon which the commission is based (e.g., consummation of a sale), the commission is deemed earned. A subsequent resignation does not negate the right to that commission unless the governing contract unequivocally states otherwise (and such stipulation is found valid).

  3. Forfeiture Clauses

    • Courts have also scrutinized “forfeiture upon resignation” clauses. If the clause is too broad or harsh, it may be declared invalid for violating fundamental labor rights. If it is reasonable, clearly written, and consistent with the mutual understanding of the parties, it may be upheld.

7. Practical Tips and Considerations

  1. Review Your Employment Contract or Commission Scheme

    • Understand precisely how and when commissions are “earned.” If the contract states that the commission is only credited when the client pays in full, or only after a probation period, these specifics will govern your entitlement.

  2. Document Your Sales and Transactions

    • To protect your right to commissions, keep thorough records of sales, transaction dates, correspondences, and any proof that your work led to the company’s receipt of payment from a customer.

  3. Undergo the Clearance Process

    • Complete any turnover or clearance requirements promptly, as some employers use pending clearances as a basis to delay final pay. Request written confirmation once you have finalized your clearance.

  4. Send a Formal Demand

    • Before escalating a dispute, attempt to negotiate or clarify in writing. A polite yet firm demand letter often prompts faster resolution.

  5. Seek Legal Advice If Necessary

    • Should your employer refuse to pay valid commissions, consult a labor lawyer or approach the DOLE for guidance on filing a complaint.

8. Summary

“Unpaid Commission After Resignation” in the Philippine context hinges on whether the commission is deemed “earned” before or upon the employee’s separation. If a commission is contractually guaranteed upon meeting certain quotas or sales closures, the employee’s subsequent resignation typically does not erase that obligation. Employers must comply with labor standards requiring timely release of final pay, which includes unpaid wages and earned commissions. Any clause attempting to forfeit a legitimately earned commission may be invalid if found unreasonable or contrary to law.

Ultimately, the primary defenses for claiming unpaid commissions come from:

  • The written employment contract (or company policy) defining commission entitlement and payout periods.
  • The Labor Code’s prohibition on withholding wages without valid cause.
  • Established jurisprudence that commissions, once earned, cannot be unilaterally withheld or forfeited unless a valid and lawful contractual stipulation supports such an action.

If disputes remain unresolved, employees have administrative recourse (DOLE, SEnA, NLRC) and judicial recourse (courts) to secure payment of lawfully earned commissions.

Important Note

This article is for general informational purposes and should not be taken as legal advice. For specific issues or complex questions regarding unpaid commissions, it is prudent to consult an attorney or seek official guidance from the Department of Labor and Employment (DOLE).

Disclaimer: This content is not legal advice and may involve AI assistance. Information may be inaccurate.

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