Incentive compensation disputes are common and almost always turn on the plan document rather than on general principles.
When is it earned. The plan should state precisely — on booking, on shipment, on invoice, on collection — and should address returns, cancellations, credits and chargebacks.
Employment at payment. Provisions conditioning payment on active employment at the payout date are enforced in some states and void in others, where earned commissions are wages that cannot be forfeited. Which rule applies is a matter of state law and is frequently misassumed.
Discretionary bonuses. True discretion must be genuine and reserved in writing. A bonus described as discretionary but paid on a consistent formula for years may be found to be earned compensation.
Plan amendment. Reserve the right to amend prospectively, with notice, and apply changes only to compensation not yet earned. Retroactive amendments are routinely struck.
Draws. State whether recoverable, and against what. Recovery of an unrecovered draw from final pay is restricted or prohibited in many states.
Statutory penalties. Sales representative statutes in many states impose multiple damages and fee shifting for unpaid commissions, including for terminated representatives, which changes the economics of a dispute considerably.