Takeaway: Most commission plans include disclaimers allowing the employer to change commission amounts at any time and preventing the plan from forming a binding contract. Yet the enforceability of these disclaimers varies by state. Many courts will still allow a lawsuit for unpaid commissions to proceed despite these disclaimers.
The 7th U.S. Circuit Court of Appeals overturned a district court decision dismissing an employee’s unpaid commission claims based on disclaimers in the commission plan, finding that Illinois law recognizes that wage claims can proceed despite these disclaimers.
Each year, Tata Consultancy Services offered incentives to its sales associates of greater pay for increased sales. In April 2020, Tata invited a sales associate to participate in such a plan that was available only to outstanding salespeople. He learned through weekly calls with Tata leadership that the maximum amount he could earn under the plan was $432,040. In August 2020, Tata showed him and other salespeople a PowerPoint presentation describing plan information and pay structures.
After the associate had been working under the plan for months, Tata’s head of sales sent an email with a document that he said was the formal version of the plan—supposedly a confirmation of the information in the presentation. But this confirmation introduced critical language: Amid a list of disclaimers, Tata stated that it retained total discretion as to whether to pay the sales associates under the...
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