Employee's Right to Compensation Accruing After Termination
| Jurisdiction | Colorado,United States |
| Citation | Vol. 13 No. 9 Pg. 1643 |
| Pages | 1643 |
| Publication year | 1984 |
1984, September, Pg. 1643. Employee's Right to Compensation Accruing After Termination
The right of an employee who is terminated by his employer to immediate payment for "labor or service earned and unpaid at the time of discharge" is codified in CRS § 8-4-104(1). However, frequently a portion of an employee's compensation comes from profit-sharing, bonus plans or other deferred compensation plans, which are expressly excluded from coverage.(fn1) Moreover, commissions on sales which close after termination do not fall within the scope of the section.
This article briefly examines the Colorado case law defining the rights and remedies of employees with regard to compensation accruing under such circumstances. Recent cases display an increased willingness on the part of the courts to recognize an implied contractual right to commissions and benefits. This, added to the traditional judicial hostility toward forfeitures, has increasingly favored recovery of such compensation by the former employee.
Absent an express agreement to the contrary, an employee's right to a commission vests when the sales contract is entered, even if under the employment contract payment occurs only when the sale is consummated.(fn2) Thus, in a suit for commissions on sales closing after termination, a prima facie case for the commissions is made when it is shown that the terminated employee would have received the commissions had he remained employed. The burden is then upon the employer to prove an express agreement that the commissions were to be forfeited upon termination.(fn3)
The principle that ambiguities in a contract are to be construed against the drafter and against forfeiture presents a formidable obstacle to employers attempting to establish an agreement that commissions are contingent on continued employment. For example, in Moorman Mfg. Co. v. Rivera,(fn4) the plaintiff alleged that the employer had deliberately cancelled his employment contract after he obtained orders but before delivery had occurred in order to deprive him of commissions on the sales.
The sales contract provided that salesmen were to receive "no commissions whatever [on orders] shipped after the termination of this contract." However, another paragraph of the contract provided that, after termination, "all commissions which are or may later become due salesman are to be held by company until accounts are paid and company property in the hands of salesman is returned...."
The Colorado Supreme Court upheld the trial court's award of the commissions to the employee, ruling that the apparent conflict between the two contractual provisions created an ambiguity. In light of the policy that such ambiguities are to be construed against the drafter of the contract and against forfeiture, the court concluded that the contract was not "clear and unequivocal" in providing for forfeiture of commissions accruing after termination and that the employee's recovery was therefore proper.(fn5)
A former employee who recovers commissions accruing after termination may also recover attorney fees under CRS § 8-1-114. While commissions on sales that close after termination do not come within the scope of CRS § 8-4-104(1), the Colorado Court of Appeals in Hofer v. Polly Little...
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