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Comment by rfrank | Hacker News Reader

> Even if they hit their quota, some reps discovered that their commissions would be clawed back if a customer dropped Zenefits within 12 months of a deal closing. It’s difficult to estimate how often this happened, but several former reps interviewed by BuzzFeed News said they or their colleagues experienced clawbacks, with thousands of dollars withheld from subsequent paychecks.

Is that legal?

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I'm consulting with a luxury vacation company where this is 100% on the up and up. The situation is:

* Sales person sells a luxury vacation for 20k for Jan 2017 * Consumer puts down deposit 2k * Sales person gets commission on 20k sale * Consumer takes vacation a year later (though sometimes this can be as much as 2 years)

If the consumer doesn't take the vacation then there's a clawback. To mitigate this the company pays out commission at 85% for sales more than 6 mo. in the future, and when the consumer makes their final deposit. then they get the remaining 15%.

I'm not sure on the legality of 12 months, but a cancellation clawback is typical. The role I was in the clawback was within the first 60 days.

For sure, I've never done the commission thing so I'm unfamiliar with how the specifics work. 12 months feels like a large window for a clawback.

agreed, that does seem really long, especially since the account executives are handing off their clients to customer success.

I think a clawback makes a lot of sense. Otherwise you are basically incentivizing your sales team to sell to people who aren't a good fit for your product.

Is there some sort of "industry standard" for clawback length? I understand the incentive it's putting in place, but after a point the sales team is pretty disassociated from the customer.

For instance, what if you're a Zenefits salesperson who closed an account 6 months ago before their compliance issues hit headlines. If that customer then cancels based on the news, will the commission be clawed back?

There are in more well-defined industries (e.g, media) and salespeople understand and value them- they would definitely consider this important to their overall package. There's more of an issue when the industry isn't well defined (like this "new benefits" industry is not), or salespeople don't have experience to know any better or ability to impact the retention of a client.

Would that typically be spelled out in the terms for their commission structure? While the ability to retain the customers may have underperformed expectations, the risk of having that money be clawed back shouldn't have been a surprise, right?

I'm pretty sure this was standard practice at a place I worked at in nyc as well. I think because this is commission pay, not actual salary. I do think it would be illegal to claw back enough to fall below their salary, whatever that may be, but salaries in sales are often pretty low. eg $40k/year after a training period.

If they were paid upfront for a 12 month contract, then probably. The clawback would be only for the unrealized revenue, so a proportionate loss of revenue.

This is pretty common on full commission jobs, or without clawbacks you would be incentivising sales people to submit bogus paperwork to paid.

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