Texas 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 Texas’ laws protecting independent manufacturers’ sales representatives, as of January 1, 2023.

The Texas Contracts with Sales Representatives and Commissions Act

Texas Statutes, V.T.C.A., Bus. & C. § 54.001

In this chapter:

(1) “Commission” means compensation paid a sales representative by a principal in an amount based on a percentage of the dollar amount of certain orders for or sales of the principal’s product.

(2) “Principal” means a person who:

(A) manufactures, produces, imports, or distributes a product for sale;

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

(C) compensates the sales representative wholly or partly by commission.

(3) “Sales representative” means an independent contractor who solicits, on behalf of a principal, orders for the purchase at wholesale of the principal’s product.

Texas Statutes, V.T.C.A., Bus. & C. § 54.002

(a) A contract between a principal and a sales representative under which the sales representative is to solicit wholesale orders within this state must:

(1) be in writing or in a computer-based medium; and

(2) state the method by which the sales representative’s commission is to be computed and paid.

(b) The principal shall provide the sales representative with a copy of the contract.

(c) A provision in the contract establishing venue for an action arising under the contract in a state other than this state is void.

Texas Statutes, V.T.C.A., Bus. & C. § 54.003

If a compensation agreement between a sales representative and a principal that does not comply with Section 54.002 is terminated, the principal shall pay all commissions due the sales representative not later than the 30th working day after the date of the termination.

Texas Statutes, V.T.C.A., Bus. & C. § 54.004

A principal who fails to comply with a provision of a contract under Section 54.002 relating to payment of a commission or who fails to pay a commission as required by Section 54.003 is liable to the sales representative in a civil action for:

(1) three times the unpaid commission due the sales representative; and

(2) reasonable attorney’s fees and costs.

Texas Statutes, V.T.C.A., Bus. & C. § 54.005

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

Texas Statutes, V.T.C.A., Bus. & C. § 54.006

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

Conclusion

Texas, 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 Texas 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.