Marr | Independent sales commissions protected in NH

An individual who is a sales representative of a number of companies may not be an employee of any of them, but rather an inde­pendent contractor.

For example, a manufac­turer’s representative for furniture companies may have a lamp line, a dining table line, and an uphol­stery chair and couch line, and sell all of these types of furniture from different manufacturers to various retail furniture stores.

The New Hampshire Legislature recognized the need to protect the sales commissions of those in­dependent contractors and established RSA 339-E.

This statute permits the sales representative, when in litigation, to recoup his attorney’s fees and costs, as well as permitting the court authority to award up to three times the commis­sion owed.

Further, that statute requires that the com­pany enter into a written agreement with the sales representative, clearly set­ting forth the commission, when it is due, and pro­viding a copy to the sales representative.

Any provision in the con­tract that attempts to force the sales representative to sue in a state other than New Hampshire is void, so the contract could still be enforced by the sales rep­resentative with him suing in New Hampshire.

The company is not allowed, by contract, to waive any of the rights of the sales representa­tive in the statute – even if he agrees in writing that he has knowingly and voluntarily waived those provisions. That waiver is still void.

For an individual con­tract sales representative who is owed commis­sion, RSA 339-E can be a powerful tool to see that commissions are promptly and timely paid, since the alternative of going to court could be costly for the company that owes the commission.

For sales representatives who like the idea of being an independent contrac­tor – perhaps because they can represent a variety of companies to sell a variety of products and have more autonomy – they should consider in that analysis whether to become a separate legal entity such ited liability company. ­

This statute only applies to independent contractor sales representatives who are individuals and not a limited liability company, a corporation, or other legal entity.

A separate legal entity may get the sales repre­sentative more or better clients, yet in doing the sales work through that legal entity, the sales rep­resentative has no rights under this statute, which only applies to individuals.

For companies that have individuals who are independent contractor sales representatives do­ing business in this state, they will want in writing in any contract, which is signed by the sales representative, to clearly state how and when the commission is due.

For example: If a company does not want to pay any commission until and unless the product is shipped and paid for, the contract should clearly set forth that understanding in the expressed terms of the contract.

Companies may also wish to insist that inde­pendent contractor sales representatives are legal entities in that if they are individuals.

Not only do they risk potential liability un­der RSA 339-E if they fail to pay the commis­sion – even if they have every intent on paying the commission – but the company may have a better argument in any subsequent legal chal­lenge by a governmental agency as to whether the independent contractor sales representatives are truly employees if the sales representatives are providing their services under a separate legal entity such as a corpora­tion or a limited liability company.

So the company may prefer to not merely retain as an independent contractor Bob Jones, sales representative, but retain Jones Sales Solu­tions Inc. – of which Bob Jones, who provides the sales services to the com­pany, does so as a share­holder and agent of Jones Sales Solutions Inc.

J. Daniel Marr is a director and shareholder at Hamblett & Kerrigan, P.A. His legal practice includes counseling businesses and individuals on a variety of legal issues and advocating on their behalf. Marr is licensed and practices in New Hampshire and Massachusetts. Marr can be reached at dmarr@nashualaw. com.