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  1. #1

    Default Is an Employer Required to Pay Commissions on Contracts Assigned to New Company

    My question involves labor and employment law for the state of: California

    I worked as an independent contractor for 5 years for a company without a signed employment agreement. I do have many oral agreements, a computer dated memorandum of terms I created in 2012, and years worth of commissions which support a commission structure from my business associate. My job was to find companies to sign up for this company's SEO services. At the beginning of this year I was told by my business partner that he was leaving the business, but not to worry because he had a friend who was going to be taking over all the support services and over the next 6 months or so all business would seamlessly be transferred to this new company. The new company's CEO knew of my existence and that all of the contracts being serviced were deals I brought into the company. I had been told he was agreeable to my terms. The transfer of services happened over a period of time. Over the next few months, the business contract that i was having new clients sign specifically stated that the company I had always worked for was now part of the new company. New company's name was right on contract. Obviously, I would not be writing up deals for the new company unless it was understood that i would paid on those deals. This was expressed verbally and implied. Due to some lawsuit threats behind the scenes, the old company (which was just a DBA) which had paid all of my commissions was suddenly shut down. The owner struck a deal with the new guy to acquire the assets. The company was just a DBA so this simply meant that new guy was taking over the contracts I had brought into company.

    In my personal deal memorandum dated 2012 it specifically states that should any asset/deal that was brought into the company by me be sold or assigned to a third party or should I or the previous owner part ways for any reason, that i should continue to be paid on my active clients for a period of seven years.

    The new owner of the old business name/contracts is stating that he has no obligation to pay me commissions on any of my deals, even new deals that have his company name on the contract that i brought in during the transfer period. he claims that his only obligation is to pay the old owner their terms for him to take over the deal since he has no contract with me.

    Questions:

    1) Is my unsigned employment agreement which is mostly oral and proven by years of performance enforceable as an independent contractor?

    2) Is the old owner of business or new owner of contracts obligated to pay me commissions on ongoing deals?

    3) can a business simply shut down and continue to have contracts serviced by rewriting contracts with a new provider and be damage proof? The business doesn't really exist, but the owner does -- AND -- the owner of the old contracts is now working with the new owner of the contracts. Essentially the contracts and the owner have been absorbed by new entity.

    4) Do "Fraudulent Inducement" (reason I stayed on), 'Fraudulent Transaction" , "Covenant of Good faith and fair dealing", Conspiracy to defraud have any bearing on this matter? It's pretty small in dollar value, probably about 1o grand. I know my best bet is small claims. is there a case?

    Thanks so much!

    Barry

  2. #2
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    Default Re: Employer Obligation to Pay Commissions on Contracts Assigned to New Company

    You appear to be stating that you worked as an independent contractor for a company that was sold to a new owner, and continued to work for the new owner. You do not appear to be challenging your classification as an independent contractor, as opposed to an employee.

    You appear to be stating that you have no clear written agreement or contract that specifies how you were to be paid, with some sort of nebulous document from 2012 that may or may not rise to the level of a contract. You appear to be stating that you worked for many months for this new owner without discussing compensation and without receiving any compensation.

    You appear to be stating that the new owner gave up on the company, and sold its assets back to the original owner, while the business entity through which the business was operated was dissolved. You appear to be stating that the original owner, now owner of the assets of the business, is telling you to get paid by the (formerly) new owner, and that the (formerly) new owner is telling you that you need to get paid by the original owner who once again owns the business.

    Is that correct?

  3. #3

    Default Re: Employer Obligation to Pay Commissions on Contracts Assigned to New Company

    HI there,

    Thanks for responding. Company A dissolved to hide from debtors/legal issues and company B took over Company A's contracts. Company B is still servicing those contracts and paying owner of company A to work under the company B banner. It's not so cut and dried as an honest asset sale because promises were made to me while both owners of both companies were working together under company A's banner before the transition was complete. During this time BOTH company names were on the contracts being signed, both company heads were aware that I was staying on due to promises of continued compensation that had been made to me orally and in an email by the head of company A. I was an independent contractor with company A solo and with company A while company A and B's name were on the contract. Never for company B after company A dissolved.

    Head of company B is saying that he does not have to pay me anything on any deals I wrote for company A or that had both company A or B's name on it because we had no official work agreement. I had spoken on the phone with the head of company B many months earlier as I was part of the asset transfer package. That is why I agreed to continue writing up contracts with both company names on them. I was going to continue to get paid just as I always had before.

    The new owner is feigning ignorance of the commission deal even though he was part of inducing me to stay on and continue working (multiple phone calls). He was aware that i was being paid on new deals with both company names on the contract with the understanding that those payments would continue once the business transition was complete. This was a nine month process.

    Does all of this need to be signed and in writing to be enforceable?

  4. #4
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    Default Re: Employer Obligation to Pay Commissions on Contracts Assigned to New Company

    Okay, now it isn't clear that Company B ever agreed to pay you a dime, that Company B was aware that Company A owed you so much as a dime, or that you ever did any work directly for Company B.

    If the money justifies it, sit down with a lawyer and go through the matter in detail, and see what the lawyer has to say about your chances of recovering money from any of the players involved. There are a lot of legal issues that could come into play -- the details matter. If the amount of money is modest, you can sue for up to $10,000 in small claims court -- and without more facts, I can't tell you who would be liable, but some might take the "Sue 'em all and let the judge sort it out" approach.

  5. #5

    Default Re: Employer Obligation to Pay Commissions on Contracts Assigned to New Company

    Thanks...

    The EDD says that: "The employment relationship establishes a contract, whether it is written or oral, express or implied. And it applies to both independent contractors and employees. I've had an agreement that was oral, expressed and implied and substantiated by years of payment/performance. Not enough dollars involved to hire an attorney. I was just hoping for some clarity regarding what might be required to win in small claims and whether it was legal to "dissolve" a company in order to escape paying on a contract if that contract is being reassigned to another party. It feels like a conspiracy to defraud and a shell game...

  6. #6
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    Default Re: Employer Obligation to Pay Commissions on Contracts Assigned to New Company

    An independent contractor is not an employee and, if you are properly classified as an independent contractor, there is no employer-employee relationship no matter how clear the contract. As the Department of Industrial Relations explains,
    Quote Quoting Does it make any difference if I am an employee rather than an independent contractor?
    Yes, it does make a difference if you are an employee rather than an independent contractor. California's wage and hour laws (e.g., minimum wage, overtime, meal periods and rest breaks, etc.), and anti-discrimination and retaliation laws protect employees, but not independent contractors.

    Additionally, employees can go to state agencies such as DLSE to seek enforcement of the law, whereas independent contractors must go to court to settle their disputes or enforce other rights under their contracts.

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