In many small businesses in addition to having an ownership interest in the corporation the shareholders, partners, or LLC members also earn sales commissions. You are entitled to both the value of your ownership interest and your earned commissions when you leave the business.

The Illinois Sales Representative Act (“ISRA” or the “Act”, 820 ILCS 120.01 et seq.), is intended to protect the right of terminated independent sales representatives to receive timely payment of their commissions.  ISRA is intended to apply to sales representative agreements that satisfy the “minimum contacts” test for jurisdiction in Illinois.[1]

The Illinois Sales Representative Act provides in pertinent part:

“(3) ‘Principal’ means a sole proprietorship, partnership, corporation or other business entity whether or not it has a permanent or fixed place of business in this State and which:

(A) Manufactures, produces, imports, or distributes a product for sale;

(B) Contracts with a sales representative to solicit orders for the product; and

(C) Compensates the sales representative, in whole or in part, by commission.”[2]

The ISRA specifically provides that in cases where there is no written agreement: “If there is no contract, or if the terms of the contract do not provide when the commission becomes due, or the terms are ambiguous or unclear, the past practice used by the parties shall control” and “If neither [the contract or past practices] can be used to clearly ascertain when the commission becomes due, the custom and usage prevalent in this State for the parties’ particular industry shall control.”[3] So, even if you did not write down a separate sales commission agreement if you were paid sales commissions you are entitled to any earned commissions when you leave the business.

The penalties for a failure to pay commissions are harsh and do not require a showing of bad faith. The Illinois Sale Representative Act 820 ILCS 120/3 provides:

“A principal who fails to comply with the provisions of Section 2 concerning timely payment or with any contractual provision concerning timely payment of commissions due upon the termination of the contract with the sales representative, shall be liable in a civil action for exemplary damages in an amount which does not exceed 3 times the amount of the commissions owed to the sales representative. Additionally, such principal shall pay the sales representative’s reasonable attorney’s fees and court costs.” (emphasis added).

Just like a wage claim, a sales representative claim can be another arrow in the quiver of an oppressed minority business owner who has been locked out of business and is seeking a buyout.

[1] Circuit Sys. v. Mescalero Sales, 925 F. Supp. 546 (N.D. Ill. 1996).

[2] 820 ILCS 120/1(3)

[3] 820 ILCS 120/1 (2)

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