Salesmen get what they're owed
Published 09/17/04

Outside sales representatives have substantial legal protection in obtaining commissions from the companies for which they work.

New Hampshire statute RSA 339-E gives independent sales representatives the right not only to collect their damages for breach of a commission contract, but also reasonable attorney's fees and costs along with giving the court discretion to award exemplary, also known as punitive, damages of up to three times the commission owed.

A sales representative covered under RSA 339-E is an "individual" other than an employee who contracts with a company to solicit orders on behalf of the company and who is compensated in whole or in part by commission. The definition of sales representative does not include one who places orders or purchases exclusively for his own account for resale.

A company liable under RSA 339-E is defined as a "person" who manufactures, produces, imports, or distributes a product for sale to customers or purchases a product for resale and uses such independent sales representatives. RSA 339-E includes a requirement that the contract must be in writing and must address certain specific details such as: (a) when and how the commissions are paid; (b) a reasonable notice period in which either party must provide the other of termination of the contract; and (c) the number of calendar days (up to a maximum of 45 days) after the date of termination or notification of death of the sales representative when commissions due shall be paid.

In the December 24, 2001 decision of John A. Cookson Company v. New Hampshire Ball Bearings, Inc ., the Court noted the legal distinction between "person" and "individual" in the context of RSA 339-E. Under the law, the term "person" regularly includes business entities such as corporations, LLCs, and the like (as well as individuals), whereas the term "individual" means a living, human being.

The Court found, among other things, that the sales representative operating under the business entity of John A. Cookson Company was not afforded protection under RSA 339-E because the company was not an "individual." The Court noted specifically that since the distinction was drawn between the company owing the commission being a "person" and a sales representative being defined as an "individual", there was little doubt that the legislature chose its words carefully.

While there can often be benefits for a business person to operate as a corporation, LLC, or other business entity, if she does so, the leverage given under RSA 339-E to collect a sales commission owed is lost.

J. Daniel Marr is a director and shareholder at Hamblett & Kerrigan, P.A. His legal practice includes counseling businesses and business persons on a variety of legal issues, including employment, and advocating on their behalf. You can reach Attorney Marr by e-mail at: dmarr@hamker.com

This information is general information and may not reflect the most current legal developments, verdicts or settlements. The information provided should not be relied upon as an indication of the actual state of the law or of future developments. The information contained on the Hamblett & Kerrigan website is for informational purposes only and does not constitute legal advice. If the information referenced may be of legal importance to you, you should consult with an attorney to provide you with legal guidance and opinion as the the effect of the current law upon your situation.