Utah Enacts Sales Representative Commission Payment Act

This posting was written by John R.F. Baer of Sonnenschein Nath & Rosenthal, author of CCH Sales Representative Law Guide.

Utah has enacted the Sales Representative Commission Payment Act, effective April 30, 2007. The statute regulates the relationship between a “principal” and an independent “sales representative” who solicits orders for products or services and receives compensation, in whole or in part, by commission.

A “principal” is a person who engages in any of the following activities with regard to a product or service: (a) manufacturing, (b) producing, (c) importing, (d) selling, or (e) distributing.

A “sales representative” is a person who enters into a business relationship with a principal to solicit orders for a product or service and under which the person is compensated, in whole or in part, by commission.

Contract Requirements

The business relationship between a sales representative and principal must be in writing, signed by both parties, and the writing must set forth the method by which the sales representative’s commission is calculated and paid. The principal has to provide the sales representative with a copy of the signed writing.

The following contract provisions are void: (a) an express waiver of any right under the statute, (b) a provision making the sales representative subject to the laws of another state, or (c) a requirement that the sales representative pursue a claim under the statute in a court not located in the state.

Payment of Commission

The statute provides that the principal shall pay the sales representative all commissions due while the business relationship is in effect in accordance with the agreement between the parties. On termination, all commissions due through the time of termination are to be paid to the representative within 30 days after termination. All commissions that become due after the effective date of termination shall be paid to the sales representative within 14 days after they become due.

Revocable Offers of Commission

The statute addresses revocable commission offers. If the principal revokes the offer, the sales representative is entitled to the agreed upon commission if the representative establishes that the revocation was for a purpose of avoiding payment, the revocation occurs after the principal obtains an order through the representative's efforts, and the ordered product or service is provided to and paid for by the customer.

Liability

A sales representative may bring a civil action against a principal for failing to comply with any provision of an agreement relating to payment of the commission or failure to timely pay commissions. If found liable, the principal is liable for (a) three times an amount calculated by (i) determining the sum of unpaid commissions owed to the sales representative and (ii) subtracting any monies the sales representative owes to the principal; (b) reasonable attorneys’ fees; and (c) court costs.

Unless payment is made pursuant to a binding and final written settlement agreement and release, the acceptance by a sales representative of a partial commission paid by the principal does not constitute a release as to the balance of any commissions claimed due. A full release of all commission claims that is required by a principal as a condition to a partial commission payment is void.

More detailed commentary and the text of the statute will be published in the CCH Sales Representative Law Guide. The Guide also includes commentary and text of the laws of 36 other states and Puerto Rico, along with form agreements, annotated explanations, and full text of court decisions.