Maryland Sales Representatives’ Commissions Statutes
Independent manufacturers’ sales representatives are typically hired by manufacturers, distributors, and importers to solicit orders for their products from potential customers in designated territories in exchange for a sales commission. Such sales representatives often spend many months or years building up a customer base in their assigned territory and incur substantial up-front sales and marketing expenses that can include travel, lodging, entertainment, and trade show expenses with the hope of generating a stream of future commission income. The sales representative is vulnerable if the principal suddenly terminates their relationship and/or fails to pay all commissions owed to the sales rep.
In response to these concerns, starting in the 1980s and 1990s, many states enacted statutes to protect the interests of these independent manufacturers’ sales representatives. These statutes often:
• Require the sales representative agreement to be in writing;
• Require the principal to provide a copy of the written contract to the sales rep;
• Require the principal to pay the sales rep for all commissions owed promptly following termination (or incur liability for statutory penalties, attorney’s fees, and court costs);
• Strictly limit the circumstances under which the principal can terminate, or fail to renew, a sales representative agreement (e.g., requiring the manufacturer to have “good cause” for termination); and/or
• Prohibit the principal from imposing terms (such as choice of law or exclusive venue provisions) in the sales rep agreement that would effectively require the sales rep to waive its statutory protections under the law.
Thirty-five of the fifty states have enacted some form of sales rep protection legislation.
This article sets forth the text of Maryland’s laws protecting independent manufacturers’ sales representatives, as of January 1, 2023.
The Maryland Wholesale Sales Representatives Act
Maryland Statutes, Labor and Employment Code § 3-601
(a) In this subtitle the following words have the meanings indicated.
(b) “Commission” means compensation that:
(1) is due to a sales representative from a principal; and
(2) accrues at:
(i) a specified amount for each order or sale; or
(ii) a rate expressed as a percentage of the dollar amount that a sales representative:
1. takes in orders for the principal;
2. makes in sales for the principal; or
3. earns in profits for the principal.
(c) “Principal” means a sales corporation, partnership, proprietorship, or other business entity that:
(1) distributes, imports, manufactures, or produces a product for wholesale;
(2) enters into a contract with a sales representative to solicit a wholesale order for the product; and
(3) pays the sales representative wholly or partly by commission.
(1) “Sales representative” means a person who:
(i) enters into a contract with a principal to solicit in the State a wholesale order; and
(ii) is paid wholly or partly by commission.
(2) “Sales representative” does not include a person who:
(i) buys a product or places an order for a product for resale by that person; or
(ii) sells or takes an order for the sale of a product to an ultimate buyer.
Maryland Statutes, Labor and Employment Code § 3-602
This subtitle does not apply to an individual who is considered under the Maryland Wage Payment and Collection Law to be employed by a principal.
Maryland Statutes, Labor and Employment Code § 3-603
A provision of a contract that is made between a sales representative and a principal is void if the provision purports to waive any provision of this subtitle by:
(1) an express waiver; or
(2) a contract subject to the laws of another state.
Maryland Statutes, Labor and Employment Code § 3-604
Each principal shall pay to a sales representative all commissions that are due under a contract that is terminated, within 45 days after payment would have been due if the contract had not terminated.
Maryland Statutes, Labor and Employment Code § 3-605
(1) Subject to the requirement of paragraph (2) of this subsection, if a principal violates § 3-604 of this subtitle, a sales representative whom the violation affects is entitled to bring an action against the principal to recover up to 3 times the amount of all commissions that the principal owes to the sales representative.
(2) At least 10 days before an action is brought under this subsection, the sales representative shall give the principal written notice of intent to bring the action.
(b) If a court determines that a sales representative is entitled to judgment in an action under this section, the court shall allow against the principal reasonable counsel fees and court costs.
Maryland Statutes, Labor and Employment Code § 3-606
For purposes of personal jurisdiction under § 6-103 of the Courts Article, a principal who contracts with a sales representative to solicit wholesale orders for a product in the State is considered to be transacting business in the State.
Maryland Statutes, Labor and Employment Code § 3-607
(a) If a principal makes a revocable offer of a commission to a sales representative who is not an employee of the principal, the sales representative is entitled to the commission agreed on if:
(1) the principal revokes the offer of commission and the sales representative establishes that the revocation was for the purpose of avoiding payment of the commission; or
(i) the revocation occurs after the sales representative has obtained a written order for the principal’s product because of the efforts of the sales representative; and
(ii) the principal’s product that is the subject of the order is shipped to and paid for by a customer.
(b) This section may not be construed to:
(1) impair the application of § 2-201 or § 2-209 of the Commercial Law Article;
(2) abrogate any rule of agency law; or
(3) unconstitutionally impair the obligations of contracts.
Maryland Statutes, Labor and Employment Code § 3-608
(a) Whenever the Commissioner determines that this subtitle has been violated, the Commissioner shall:
(1) try to resolve any issue involved in the violation informally by mediation; or
(2) ask the Attorney General to bring an action on behalf of the applicant or employee.
(b) The Attorney General may bring an action under this section in the county where the violation allegedly occurred for injunctive relief, damages, or other relief.
Maryland, like a majority of states, has enacted sales representative legislation. Manufacturers, distributors, and importers typically bear the burden of compliance with these statutes and should ensure that their contracts and activities are consistent with applicable law. Sales representatives may wish to review applicable laws to understand their rights. If the laws of multiple states are involved, compliance with the relevant law may become even more complicated, and legal advice from a Maryland sales rep attorney may be appropriate.
About the Author
Craig W. Trepanier is a sales representative attorney who handles disputes under the Minnesota Termination of Sales Representatives Act and the laws of other jurisdictions. He can be reached at email@example.com or at 612.455.0502. Trepanier MacGillis Battina P.A. is a Minnesota sales representative law firm located in Minneapolis. If you need advice regarding your sales representative agreement, or are having a dispute regarding the termination, non-renewal, or modification of a sales rep agreement or unpaid commissions, please contact us. Mr. Trepanier can represent you in the State of Minnesota. If appropriate, we can co-counsel with an attorney in your jurisdiction to leverage our specialized knowledge of sales rep law.