Michigan 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 Michigan’s laws protecting independent manufacturers’ sales representatives, as of January 1, 2023.
The Michigan Actions for Unpaid Sales Commissions Act
Michigan Statutes, M.C.L.A 600.2961
(1) As used in this section:
(a) “Commission” means compensation accruing to a sales representative for payment by a principal, the rate of which is expressed as a percentage of the amount of orders or sales or as a percentage of the dollar amount of profits.
(b) “Person” means an individual, corporation, partnership, association, governmental entity, or any other legal entity.
(c) “Prevailing party” means a party who wins on all the allegations of the complaint or on all of the responses to the complaint.
(d) “Principal” means a person that does either of the following:
(i) Manufactures, produces, imports, sells, or distributes a product in this state.
(ii) Contracts with a sales representative to solicit orders for or sell a product in this state.
(e) “Sales representative” means a person who contracts with or is employed by a principal for the solicitation of orders or sale of goods and is paid, in whole or in part, by commission. Sales representative does not include a person who places an order or sale for a product on his or her own account for resale by that sales representative.
(2) The terms of the contract between the principal and sales representative shall determine when a commission becomes due.
(3) If the time when the commission is due cannot be determined by a contract between the principal and sales representative, the past practices between the parties shall control or, if there are no past practices, the custom and usage prevalent in this state for the business that is the subject of the relationship between the parties.
(4) All commissions that are due at the time of termination of a contract between a sales representative and principal shall be paid within 45 days after the date of termination. Commissions that become due after the termination date shall be paid within 45 days after the date on which the commission became due.
(5) A principal who fails to comply with this section is liable to the sales representative for both of the following:
(a) Actual damages caused by the failure to pay the commissions when due.
(b) If the principal is found to have intentionally failed to pay the commission when due, an amount equal to 2 times the amount of commissions due but not paid as required by this section or $100,000.00, whichever is less.
(6) If a sales representative brings a cause of action pursuant to this section, the court shall award to the prevailing party reasonable attorney fees and court costs.
(7) In an action brought under this section, jurisdiction shall be determined in accordance with chapter 7.1
(8) A provision in a contract between a principal and a sales representative purporting to waive any right under this section is void.
(9) This section does not affect the rights of a principal or sales representative that are otherwise provided by law.
Conclusion
Michigan, 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 Michigan sales rep attorney may be appropriate.
If you are interested in the sales representative statutes of other states, click here to view our sales representative statute survey page.
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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 craig@trepanierlaw.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.