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Connecticut Supreme Court Rules Commissioned Employees Entitled to Keep Unearned Commissions

In Ravetto v. Triton Thalassic Technologies, Inc., the Connecticut Supreme Court held that the use of the terms “advance” and “draw” in an employment agreement with a commissioned employee was not enough to require the employee to repay advances on commissions that the employee never earned.

The employment agreement at issue provided the Plaintiff, in addition to a $110,000 salary, a draw in each pay period as an advance against future commission payments. In March 2002, the company laid off all its employees until further notice. The Plaintiff sued the company under Connecticut’s wage payment statute for unpaid salary plus interest. In its defense, the company argued it was entitled to deduct from the approximately $40,000 in salary it owed the Plaintiff the money it had advanced the Plaintiff in excess of the commissions the Plaintiff actually earned. The trial court disagreed and interpreted the agreement to mean that the Plaintiff did not have to repay advances. The company appealed.

The Connecticut Supreme Court, gleaning guidance from decisions from other states, held that “the use of terms such as ‘advance’ or ‘draw,’ standing alone, is not sufficiently indicative of the parties’ intent to obligate the employee to repay the advances.” The Court further held that because the employer enjoyed superior bargaining power over the Plaintiff, it was imperative for the employer to “make any obligation for reimbursement explicit in the employment agreement.” Thus, without a provision specifically providing the employee must return advances in the event his or her commissions do not cover the amount advanced, an employer cannot hold an employee personally liable for repayment of advances.

The importance of the Ravetto case is obvious. The Connecticut Supreme Court has announced that in order for employers to hold their commissioned employees liable for repayment of advances, there must be specific, express language in the employment agreement to that effect; simply using the terms “draw” and “advance” will not suffice. For employers with commissioned employees, review your agreements and verify such language is present, and also ensure all future agreements contain the same.

Brody and Associates regularly provides counsel to employers on all labor and employment law matters. If we can be of assistance in this area, please contact us at 203-965-0560 or at info@brodyandassociates.com.