HR Management & Compliance

Ask the Expert: Sick Leave Policy Reduces Employee Commissions

We have an employee who has had excessive absences this year (over a dozen). All employees are given three sick days annually. Our policy says that if you (the employee) are absent with sick pay you will have 20% of your commission reduced. If you are absent but have no more sick pay accrual, you will lose 50% of your weekly commission. This is based on personal commission, not team commissions.

At this time, the employee has not made any indications the time off is for a serious health condition (FMLA/ADA). Can we reduce the employee’s commissions for these absences?

The policy you describe presents some concerns.
First, generally commissions are considered wages earned and cannot be deducted for disciplinary purposes. Because the commission reduction is written as a policy, the employer should have the policy terms reviewed by an employment law attorney licensed to practice in the employer’s state to determine if the policy/ potential contract provision is permissible or not.

Second, even if the policy provision is permissible as a contract provision, it may also present an issue as being discriminatory. Because the loss of commission is based on the use of sick leave, and sick leave may be taken when an employee is suffering from a protected serious health condition or disability under the FMLA or ADA, the employer may also run the risk of a claim of discrimination and/or retaliation under either or both statutes.

Employees on FMLA leave are not entitled to any payment based on the achievement of a specified goal such as hours worked, products sold or perfect attendance (assuming that the employee has not met the goal due to FMLA leave). However, under the policy you describe, the employee suffers a reduction in commission already earned, based solely on the fact that he/she utilized sick leave.

As a result of these concerns, we strongly suggest that the employer review the specific terms of the policy with local employment counsel in order to obtain a determination as to its legality.