Commission-based pay is common across North Carolina, particularly in sales, business development, professional services, and related industries. Disputes over unpaid or forfeited commissions are also among the most frequent wage claims brought by employees in Charlotte, Raleigh, Wilmington, and throughout the state.
North Carolina law allows employers to compensate employees through commissions, but it places clear legal limits on when commissions must be paid, how commission plans may be changed, and what happens to commissions after employment ends. Employers often assume they have wide discretion in this area. In reality, the North Carolina Wage and Hour Act imposes specific obligations that are often misunderstood or ignored.
This article explains the basic rules from an employee-focused perspective.
Commissions Are Wages Under North Carolina Law
Under the North Carolina Wage and Hour Act, commissions are treated as wages when an employer has a policy or practice of paying them. This classification is critical. Once compensation qualifies as wages, it is protected by state wage laws governing payment, timing, and withholding.
Commissions are not excluded from wage protections simply because they are incentive-based or performance-driven. If an employer promises commissions in an offer letter, commission plan, employment agreement, or consistent practice, those commissions are generally considered wages under North Carolina law.
When a Commission Is Earned
The most important issue in any commission dispute is determining when the commission is earned. North Carolina law permits employers to define how and when commissions are earned, but that definition must be clear, written, and communicated in advance.
A compliant commission plan should explain what constitutes a sale, when the commission is earned, when it will be paid, and how commissions are handled if employment ends. If an employer’s documents fail to clearly define earning conditions, North Carolina regulations require that ambiguity be interpreted in favor of the employee.
Many disputes arise when employers argue that a commission was not earned, even though the employee completed the work that generated the sale. When commission plans are vague or incomplete, employers often lose that argument.
Changing Commission Plans in North Carolina
Employers in North Carolina may change commission structures, but only prospectively and only with proper notice. An employer generally may not retroactively reduce commissions or change the rules after the work has already been performed.
Changes to commission rates or eligibility must be provided in writing and must apply only to future earnings. Employers may not lawfully take away commissions that were earned under the prior plan. Attempts to characterize changes as policy clarifications rather than reductions frequently fail when the change affects compensation already earned.
Commissions After Termination of Employment
Commission disputes often arise when employment ends. Under North Carolina law, earned commissions must be paid on the first regular payday after the amount becomes calculable, even if the employee is no longer employed.
Employers may include commission forfeiture provisions, but forfeiture is not automatic or unlimited. North Carolina law permits commission forfeiture only if the employee received advance written notice of a forfeiture policy. Even then, forfeiture provisions are closely scrutinized.
An employer generally may not withhold commissions simply because the employee resigned, was terminated, or was not employed on the payout date, if the commission was already earned under the employer’s own plan.
Employment on the Payout Date Clauses
Many commission plans state that an employee must still be employed on the payout date to receive commissions. These clauses are not automatically enforceable in North Carolina.
Courts and regulators examine whether continued employment is truly part of the earning definition or whether the clause operates as a forfeiture of earned wages. When earning conditions are unclear, payout-date requirements are often vulnerable to challenge, particularly when the employee completed the underlying work before termination.
Why Commission Disputes Matter
Unpaid commissions are not merely contract disputes. When commissions qualify as wages under the North Carolina Wage and Hour Act, employees may be entitled to unpaid wages, interest, and in some cases attorneys’ fees.
Employees in Charlotte, Raleigh, Wilmington, and across North Carolina should not assume that a lost commission is lawful simply because an employer claims it is forfeited. Many commission disputes turn on documentation, notice, and timing rather than employer intent.
Conclusion
North Carolina employers must clearly define when commissions are earned, provide advance written notice of commission terms and changes, pay earned commissions after termination, and avoid retroactive reductions or ambiguous forfeiture provisions.
When employers fail to follow these rules, commission withholding can violate North Carolina wage law. Employees who believe commissions were improperly withheld should have the facts reviewed under the Wage and Hour Act, not just the employer’s label or explanation.