How can I protect my commission with a failing business?

UPDATED: Oct 2, 2022

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How can I protect my commission with a failing business?

Currently I am employed with a custom home
builder and in my contract it states that if
agreement is terminated by employee, commissions
on homes under contract as of the date of
employees written notice, which have not closed
or on which work on footers has not commenced
will be paid commissions but only if the home
closes or work on footers commences within 30
days of written notice of termination. Any
commission otherwise will be forfeited and
assigned to another sales consultant. This is a
family owned business, what I did not know when
signing this contract was the project manager in
the field is the owners brother, the only other
sales consultant is their Mother,there are only
2, the mom and myself and the owner is an
alcoholic that has fallen off the wagon and
incapable of performing his duties as the owner.
Currently the business is falling apart. The
owner has been failing to do payroll or show up
for tasks required in order for me to perform my
job, and today we got a call at the office that
the rent has not been paid in 3 months and the
last check written had bounced. The business is
not healthy and they have a vested interest in
delaying any closings on homes beyond the 30
days stated in my contract on homes I have sold
that are due to close soon if I put in my 30
days since the commissions would go to their
mother aka back to the business. Are there any
steps I can take now to avoid losing most of my
commission? It’s about 35k I risk losing.

Asked on August 12, 2019 under Employment Labor Law, North Carolina


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

You don't have any good options. All contracts contain an extra unwritten term, one added by the law: the "implied covenant of good faith and fair dealing." (That's the traditional term; it's possible your state has a different term for it.) This obligates the other side to not deliberately take steps or do things to destroy the purpose or value of the contract to you--such as, for example, deliberately delaying closings or works when they don't otherwise have to, to avoid paying earned commissions. If they violate this covenant by acting in bad faith, you could sue them for the breach, to get your money. But the reason this is not a good option is that, as you can imagine, "good faith" is a subjective thing--there is no hard-and-fast definition of what is good faith or not, but rather it's up to the court, on a case-by-case basis, to decide what is and is not good faith. It can be hard to convince a court that someone acted in bad faith if there they can put up *any* plausible explanation for their actions or a delay--e.g. a cash flow shortage or difficulties, which is highly plausible if the buisness has been having difficulties. You might not be able to prove their bad faith so as to win the lawsuit.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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