You did the work. You closed the sale. You got stiffed on your commission. Under Illinois law, you have a powerful tool to help you collect that commission. It’s called the Illinois Sales Representative Act, 820 ILCS 120/1 et seq. (“ISRA“). We recently represented a former professional athlete who now works as an independent sales representative for an Illinois manufacturer. When the manufacturer failed to pay him, the ISRA proved to be a powerful weapon in his arsenal to collect hundreds of thousands of dollars in past due commissions. This blog post provides an overview of the ISRA and how it works.
Who Is Covered By The ISRA?
Under Section 1 of the ISRA, a “sales representative” means a person who contracts with a principal to solicit orders and who is compensated, in whole or in part, by commission, but shall not include one who places orders or purchases for his own account for resale or one who qualifies as an employee of the principal pursuant to the Illinois Wage Payment and Collection Act. 820 ILCS 120/1. In sum, it generally covers independent contractors (not employees) who solicits sales for a person or company and who gets paid in whole or in part by commission. It will not cover you if you solicit sales and then resell the product to someone else.
Who Is A “Principal” Under the ISRA?
Section 1 of the ISRA defines a “principal” as either a sole proprietorship (someone operating a business in his own name or as d/b/a), 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.
What Amount of Commission Are You Entitled To?
Section 1 also defines when a commission becomes due. First, if there is a contract between the salesperson and the principal (the company you are working for), then the terms of the contract control when the commission is due. Second, 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 when the commission becomes due. If neither of these factors exist to clearly ascertain when the commission becomes due, the “custom and usage” prevalent in this State for the parties’ particular industry shall control.
When Are Commissions to Be Paid?
Under the ISRA, commissions due at the time of termination of a contract between a sales representative and principal shall be paid within 13 days of termination, and commissions that become due after termination shall be paid within 13 days of the date on which such commissions become due. 820 ILCS 120/2. Importantly, if the contract language tries to waive this requirement, the ISRA states that such a waiver is void. In other words, it would be unenforceable. Moreover, a claim under the ISRA will only exist if the relationship between the sales rep and the principal has terminated.
This is because the ISRA is intended to protect sales representatives from being denied commissions that are due or may become due after a contract is terminated. Fararo v. Sink LLC, Nos. 01 C 6956, 2002 U.S. Dist. LEXIS 23022 (N.D. Ill. Nov. 27, 2002); Klessman & Assoc., Inc. v. American Sensors, Inc., No. 97 C 0556, 1998 U.S. Dist. LEXIS 7124 (N.D. Ill. Apr. 28, 1998) (Grady, J.). The ISRA, therefore, will not apply to a sales relationship where a contract is still in effect.” Id.
Punitive Damages Under the ISRA.
One of the most powerful advantages of the ISRA is that the salesperson may recover punitive damages and attorneys’ fees. Section 3 of the ISRA states that a principal who fails to comply with the provisions of Section 2 (timing of the commission 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 three (3) times the amount of the commissions owed to the sales representative. 820 ILCS 120/3. This treble damage provision gives the sales representative significant leverage in negotiations and litigation.
Courts have ruled that an award of punitive damages under the ISRA requires the salesperson to prove the principal’s failure to timely pay his commissions was willful and wanton or the result of a vexations refusal to pay. Staebell v. L’amour Hosiery, Inc., No. 98 C 50167, 2002 U.S. Dist. LEXIS 11030 (N.D. Ill. June 18, 2002); Staebell v. L’amour Hosiery, Inc., No. 98 C 50167, 2002 U.S. Dist. LEXIS 11030 (N.D. Ill. June 18, 2002) (award of punitive damages must be supported by a finding of culpability exceeding bad faith, such as evidence that the principal’s conduct was intentional, outrageous, or done with evil motive or reckless indifference to the salesperson’s rights).
Attorneys’ Fees Under The ISRA.
Section 3 of the ISRA also states that a principal shall pay the sales representative’s reasonable attorney’s fees and court costs. 820 ILCS 120/3.
This provision is mandatory because the ISRA states that a court “shall” award reasonable attorneys’ fees and costs to a prevailing party, and no finding of bad faith is required. Nicor Energy v. Dillon, No. 03 C 1169, 2004 U.S. Dist. LEXIS 86 (N.D. Ill. Jan. 7, 2004); Maher & Assocs. v. Quality Cabinets, 267 Ill. App. 3d 69 (Ill. App. Ct. 2d Dist. 1994); Staebell v. L’amour Hosiery, Inc., No. 98 C 50167, 2002 U.S. Dist. LEXIS 11030 (N.D. Ill. June 18, 2002) (salesperson did not need to show that the corporation’s conduct was willful or wanton in order to recover the salesperson’s attorney’s fees and costs).
The trial lawyers at DeBlasio Law Group have the experience you need to face the most difficult challenges in court, including the Circuit Court of Cook County, the DuPage County Circuit Court in Wheaton and the Will County Circuit Court in Joliet. With offices in Oakbrook Terrace, Illinois, we are strategically located near the major circuit courts and major highways and interstates. Call us at (630) 560.1123. www.DGLLC.net.