If commissioned salespeople help drive your revenue, you probably think a lot about how to keep them motivated. You may not think as much about what happens to their commissions when they leave, especially if they go straight to a competitor. A new Illinois appellate decision, Siwik v. Jasmine Enterprises Inc., shows that a carefully written commission agreement can protect your business in that situation. It also demonstrates that small drafting choices about when a commission is "due" can decide who wins lawsuits that arise when sales reps leave.

Illinois' Sales Representative Act protects independent sales reps' commissions. In general, a business has to pay all commissions that are due when the relationship ends within 13 days, and a contract can't sign those rights away. Here is how one company stayed within that rule and still kept the commissions of a rep who went to a competitor.

What Happened

In 2019, a sales rep signed an agreement to be the exclusive sales agent for Jasmine Enterprises, a bridal dressmaker. She earned a 7.5% commission, which became due once the dresses shipped. The agreement barred her from selling competing dresses while it was in effect. If she broke that rule, the agreement would end automatically and she would give up any commissions that were or might become due, as agreed-upon ("liquidated") damages.

In April 2022, the sales rep gave notice that she would leave on May 22. Less than a week later, before that date arrived, she signed on with a competitor. The competitor soon announced she had already taken orders for it. Jasmine terminated the relationship and withheld her April commissions, roughly $9,500. She sued.

Jasmine won at trial and again on appeal. The court reasoned that if the rep broke the noncompete before the relationship ended, the contract dictated commissions were no longer due at that time. Therefore, no commissions were due when it ended, and the law wasn't violated. The court also upheld the forfeiture as reasonable agreed-upon damages, largely because the company's owners explained the real harm a defecting rep causes and the rep didn't seriously dispute that testimony.

What that Means for Your Business

This case is good news for businesses that rely on commissioned salespeople, but only for those whose agreements are written with care. Now is a good time to pull out your current sales rep agreements and check how they handle commission timing, noncompetes, and what happens when a rep leaves for a competitor.

1. Spell out exactly when a commission is "due." Jasmine's agreement tied commissions to shipment. The court treated that as the earliest point a commission could be due, not a guarantee it would stay due no matter what. Agreements should clearly state when commissions are earned and when they're payable.
2. Say clearly what can cancel a commission, and that it must happen before the relationship ends. The court drew a line. A contract can't make a rep give up commissions that are due when the relationship ends. It can say commissions cease being due because of something that happens first, like breaking a noncompete. This kind of provision should be in plain, specific terms.
3. Pair your noncompete with a clear consequence. Jasmine's agreement barred competing sales during the relationship. It also said a violation would end the agreement automatically and forfeit commissions. Having both pieces in writing is what made the provision work.
4. Proportion penalties to the real harm. Jasmine's older agreement had a fixed $50,000 damages amount. Reps said that was out of proportion to what they earned, so the company revised the provision. The court treated that history as support for the revised clause. A number that looks like punishment instead of compensation is risky.
5. Review older agreements. A forfeiture or damages clause written years ago may not reflect the difference between commissions due during the relationship and commissions due when it ends. It's worth a fresh look now.
6. Act carefully when a rep leaves. Jasmine terminated the relationship in writing promptly after learning the rep was working for a competitor. The timing of a violation and of the termination drove the outcome. When a rep gives notice, it is a good practice to be deliberate about what you do and when, and document it.

If you'd like help reviewing or updating your commission agreements, or if you have questions, please contact Trager Metge at tmetge@ubglaw.com and the Business Litigation Team at UB Greensfelder.

The information provided in this alert reflects the information and guidance we have available as of the date of publication and is subject to change. This legal update was prepared by UB Greensfelder LLP and is not intended as a substitute for professional legal advice, nor does it create an attorney-client relationship.