North Carolina 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 North Carolina’s laws protecting independent manufacturers’ sales representatives, as of January 1, 2023.
The North Carolina Sales Representative Commissions Act
North Carolina Statutes, N.C.G.S.A. § 66-190
The following definitions apply in this Article:
(1) “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, sales, or profits or as a specified amount per order or per sale.
(2) “Person” means an individual, corporation, limited liability company, partnership, unincorporated association, estate, trust, or other entity.
(3) “Principal” means a person who:
a. Manufactures, produces, imports, or distributes a product or service;
b. Contracts with a sales representative to solicit orders for the product or service; and
c. Compensates the sales representative, in whole or in part, by commission.
(4) “Sales representative” means a person who:
a. Contracts with a principal to solicit orders for products or services;
b. Is compensated, in whole or in part, by commission;
c. Is not a seller who complies with:
1. G.S. 25A-39 and G.S. 25A-40; or
2. Part 429 of 16 Code of Federal Regulations (January 1, 2003);
d. Repealed by S.L. 2003-331, § 1, eff. Oct. 1, 2003.
e. Is not an employee of the principal;
f. Does not sell or take orders for the sale of advertising services; and
g. Is not a person requiring a real estate broker’s or sales agent’s license under Chapter 93A of the General Statutes.
(5) “Terminate” and “termination” mean the end of the business relationship between the sales representative and the principal, whether by agreement, by expiration of time, or by exercise of a right of termination of either party.
North Carolina Statutes, N.C.G.S.A. § 66-190.1
The agreement or contract between a sales representative and a principal shall be in writing. The absence of a written agreement or contract shall not bar a cause of action by, or any remedy available to, a party.
North Carolina Statutes, N.C.G.S.A. § 66-191
When a contract between a sales representative and a principal is terminated for any reason other than malfeasance on the part of the sales representative, the principal shall pay the sales representative all commissions due under the contract within 30 days after the effective date of the termination and all commissions that become due after the effective date of termination within 15 days after they become due. If the principal does not make payment as required by this section, the sales representative shall make a written demand upon the principal, sent by certified mail, for the commissions then due. The principal shall respond in writing to the demand within 15 days after the principal receives the written demand.
North Carolina Statutes, N.C.G.S.A. § 66-192
(a) A principal who fails to comply with the provisions of G.S. 66-191 or is shown to have wrongfully revoked an offer of commission under G.S. 66-192.1 is liable to the sales representative in a civil action for (i) all amounts due the sales representative plus exemplary damages in an amount not to exceed two times the amount of commissions due the sales representative, (ii) attorney’s fees actually and reasonably incurred by the sales representative in the action, and (iii) court costs.
(b) Where the court determines that an action brought by a sales representative against a principal under this Article is frivolous, the sales representative is liable to the principal for court costs and for attorney’s fees actually and reasonably incurred by the principal in defending the action.
(c) A principal who is not a resident of this State who contracts with a sales representative to solicit orders in this State shall be subject to personal jurisdiction as provided in G.S. 1-75.4.
(d) Nothing in this Article shall invalidate or restrict any other or additional right or remedy available to a sales representative or preclude a sales representative from seeking to recover in one action on all claims against a principal.
North Carolina Statutes, N.C.G.S.A. § 66-192.1
If a principal makes a revocable offer of a commission to a sales representative, the sales representative is entitled to the commission agreed upon if:
(1) The principal revokes the offer of commission;
(2) The sales representative establishes that the revocation was for the purpose of avoiding payment of the commission;
(3) The revocation occurs after the principal has obtained a written order for the principal’s product or service because of the efforts of the sales representative; and
(4) The principal’s product or service that is the subject of the order is provided to and paid for by a customer.
North Carolina Statutes, N.C.G.S.A. § 66-193
A provision in any contract between a sales representative and a principal purporting to waive any provision of this Article, whether by expressed waiver or by a contract subject to the laws of another state, is void.
Conclusion
North Carolina, 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 North Carolina 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.