Tennessee Independent Wholesale Sales Representatives 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 Tennessee’s laws protecting independent manufacturers’ sales representatives, as of January 1, 2023.

The Tennessee Contracts with Sales Representatives and Commissions Act

Tennessee Statutes, T.C.A § 47-50-114

(a) As used in this section:

(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 dollar amount of orders or sales;

(2) “Principal” means a person who:

(A) Manufactures, produces, imports, or distributes a product for wholesale;

(B) Contracts with a sales representative to solicit orders for the product; and

(C) Compensates the sales representative, in whole or in part, by commission;

(3) “Sales representative” means a person who contracts with a principal to solicit wholesale orders and who is compensated, in whole or in part, by commission, but does not include one who places orders or purchases for such person’s own account for resale; and

(4) “Termination” means the end of services performed by the sales representative for the principal whether by discharge, resignation, or expiration of a contract.

(b)

(1) The terms of the contract between the principal and sales representative shall determine when a commission becomes due.

(2) 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 shall control.

(3) All commissions that are due at the time of termination of a contract between a sales representative and principal shall be paid within fourteen (14) days after the date of termination. Commissions that become due after the termination date shall be paid within fourteen (14) days after the date on which the commissions become due.

(c) When the contract between a sales representative and a principal is terminated and the contract was not reduced to writing, all commissions due shall be paid within fourteen (14) days of termination.

(d) A principal who, acting in bad faith, fails to comply with subsection (c) concerning timely payment may be liable in a civil action for exemplary damages in an amount which does not exceed treble the amount of the commissions owed to the sales representative. Additionally, such principal shall pay the sales representative’s reasonable attorney’s fees and court costs. If the court determines that an action to collect such exemplary damages has been brought on frivolous grounds, reasonable attorney’s fees and court costs shall be awarded to the principal.

(e) A principal who is not a resident of this state and who enters into a contract subject to this chapter is considered to be doing business in this state for purposes of the exercise of personal jurisdiction over the principal.

(f) A provision of this chapter may not be waived, whether by express waiver or by attempt to make a contract or agreement subject to the laws of another state. A waiver of a provision of this chapter is void.

(g) This chapter does not invalidate or restrict any other right or remedy available to a sales representative or preclude a sales representative from seeking to recover in one (1) action on all claims against a principal.

Conclusion

Tennessee, 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 Tennessee 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.

______________

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.