Commission Entitlements for Salespeople That Have Left Your Employment
by Stephen Farrell
Senior Employee Relations Consultant
The entitlement to commission for salespeople who had ended their employment with the employer after a property had been sold but prior to the property being settled is well known. However, did you know that salespeople who have left your employment are also entitled to commission for the listings that the salesperson brought in prior to ending employment but had not yet been sold when the employment ended?
The Real Estate Industry Award 2010 underwent a review by the Fair Work Commission and in April 2018, the Award was significantly changed.
One of the less notorious provisions inserted into the Award was the entitlement for the first time, of salespeople to a portion of the commission paid to the real estate agent by the vendor for the sale of the property where the salesperson had listed the property, but the property had not been sold prior to the salesperson leaving employment.
There are a few conditions that have to be met first, however. Firstly, the listing must be on an exclusive agency basis. If the employer does not have the exclusive right to sell the property (eg where the property is listed on a conjunctional basis between two agents), then there is no entitlement for a portion of the commission to the salesperson who has left employment. Secondly, both the agency and the vendor have to have entered into a legally enforceable contract for the sale of the property. Finally, the property must have been sold prior to the expiration of period in which the agency has the exclusive right to sell the property.
The Award provides for the actual amount or portion to be agreed in writing between the employee and employer, however if there is no agreement, then the employee is entitled to the amount they would have received had the employee remained in employment. Therefore, it is crucial that at the commencement of an employee’s employment, a provision is made in the contract of employment for the amount to be paid in the above situation. The REEFWA have such a provision and members are able to access the contract templates. Where employees commenced employment with members prior to April 2018, it is strongly recommended that an agreement is reached on the amount of the portion that the salesperson is entitled to in this situation as soon as possible and certainly prior to the salesperson’s employment ending.
Q: What if the listing that the former salesperson was responsible for expires and is then renewed for another period of time at which point it then sells?
A: The former employee is not entitled to any commission as the property was sold after the expiration date of the exclusive agency period that the former employee was responsible for.
Q: What if I have dismissed the former employee for serious misconduct?
A: The employee is only entitled to commission for the sale of properties (settled or not yet settled) that the employee was responsible for prior to or on the date of dismissal. There is no entitlement to commission for properties sold after the date of dismissal, even if they were properties the employee was responsible for listing with the employer and were sold in the exclusive agency period.
For the purposes of this article, the following definitions apply:
Exclusive Agency Period – The period of time that the Agent has the exclusive right to sell the listing.
Listing – The entering into a legally enforceable contract between the Agent and the Vendor for the Agent to see the Vendor’s property.
Sale – The entering into a legally enforceable contract between the Vendor and a Buyer for the sale of the Vendor’s property.
Settlement – The transfer of ownership of the property from the Vendor to the Buyer.
REEFWA members are able to call the Employee Relations Advice Line (ERAC) on 9365 7660 if they have any questions in relation to the above.