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September 20, 2022
Offer Letter Mistake Costs Employer $960K

by Michael P. Maslanka

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The Texas Supreme Court just issued an important opinion on the payment of commissions to employees. The employer’s failure to simply insert one extra paragraph in an offer letter resulted in a whopping verdict against it of $962,336.89 for unpaid commissions, $80,282.63 in prejudgment interest, and postjudgment interest at 5%, to say nothing about attorneys’ fees! To avoid this fate, read on.

The Offer Letter

Thomas Perthuis was offered a job by Baylor Miraca Genetics Laboratories. His position? Sell the company’s genetic tests. His title? Vice president of sales and marketing. His salary? $145,000 a year on at at-will basis. His commissions? 3.5% of net sales. And that was that. There was no other explanation on any of the terms. There was just a “Period. Full Stop!” And that is where the trouble started and ended.

‘I Closed the Deal!’ Is Met with ‘You’re Fired!’

Perthuis closed a big deal. In fact, it was the largest order of its type in the history of the company. He relayed his success to company management on January 18, 2017. The CEO immediately requested a meeting the following Monday. But alas, it was not colorful balloons and confetti that greeted Perthuis; it was a pink slip. The very next day, the deal was signed by the company and the client.

The court’s opinion isn’t clear on the reason for Perthuis’ termination, but it appears the company was in a perilous financial condition. No commissions were forthcoming, but a lawsuit for their recovery was.

Who Wins and Why?

The court wrote a long opinion explaining a simple idea: If you make a deal, you are held to its terms. The deal in this case—make a sale, and you receive 3.5% of your net sales. Perthuis did what he had been asked, but the employer didn’t do what it had promised. The court made clear the company could have but did not. Here is the court on what the employer could have done:

The contract could deny the payment of commissions from procured sales absent continued employment; authorize commissions only on sales that close during the employment . . . relationship; condition commissions on the money from the sale being received within a particular time frame; provide a time limit after termination beyond which commissions from procured sales will not be paid; or include a myriad of other terms.

In other words, if you want to take advantage of an employee, you have all sorts of ways to do so, you just need to tell the employee up front. If the employee agrees to the deal, well, that is on the employee. Perthuis v. Baylor Miraca Genetics Laboratories, Inc. (Case No. 21-0036, May 20,2022).

Bottom Line

This case reminds us of the proverb: “For want of a nail the shoe was lost. For want of a shoe the horse was lost. For want of a horse the rider was lost. For want of a rider the message was lost. For want of a message the battle was lost. For want of a battle the kingdom was lost. And all for the want of a horseshoe nail.”

Read your offer letters now. If commissions are part of the compensation deal, consider the issues raised by this case. But always remember this: Just because the law gives you the right to do something, that doesn’t mean you should do it. People want to be treated fairly. I promise, the loyalty engendered when you do will pay you back multiple times.

Michael P. Maslanka is an assistant professor at the UNT-Dallas College of Law. He practiced law from 1981 until he joined the faculty in July 2015. He was Chair of the Labor and Employment section of a large Dallas firm and was the managing partner of the Dallas office of two national law firms prior to July 2015. You can reach him at michael.maslanka@untdallas.edu.

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