Q. I hired a sales agent and agreed to pay him a percentage of the gross sales that he generates as his commission. In retrospect, I didn’t realize how much money he would earn, and it seems that he exploited me (ona’ah). Am I obligated to pay him such a high commission? Since we never signed a contract, could I simply pay him a commission comparable to what other sales agents earn?
A. When an employee begins working after an employment agreement was reached, the terms and conditions of that agreement are binding even if they did not formalize the agreement with a kinyan or contract (Rosh, Avodah Zara 4:2).
The relationship between a business owner and a sales agent is an employment agreement. Therefore, once the agent starts working, the employer must pay him depending on their agreement, either a percentage of those sales as a commission or a set salary for his work.
When a sales agent is hired, one cannot argue that the agreement is not binding since it involves something that does not yet exist (davar she’lo ba la’olam). Although it is true that one cannot buy or sell something that does not yet exist (C.M. 209:4), that has no relevance to employment agreements. The employer is not selling the agent a percentage of future sales; he is committing to pay the sales agent a commission for his work. Since the employer’s obligation is rooted in his commitment to pay the agent his salary rather than selling a percentage of the future sales, it is not subject to the limitation of davar she’lo ba la’olam (Ketzos 332:5, 6; ibid. 122:3, 4; Nesivos 332:5).
Your feeling that the amount of money you are paying the sales agent is excessive and unreasonable is common. We often hear this sentiment from business owners. At the outset, the business owner needs the sales agent to generate business and agrees to pay him a commission since he needs someone to make sales. Since the business owner cannot generate that volume of sales it is worthwhile for him to pay the sales agent a high percentage.
Once the customers are brought in, the business owner begins to wonder why he is paying so much money to the sales agent when he may not be bringing in additional customers. At that point, the business owner questions whether the sales agent has exploited him by collecting such a large commission. However, the seemingly large percentage may not involve any exploitation since that may be the percentage that sales agents in that industry collect. Therefore, a business owner should not look negatively at the sales agent; he should instead appreciate the revenue that he generated.
However, if the sales agent is collecting a larger percentage than other sales agents in that industry and he is not doing additional work to justify the higher percentage, it is necessary to consider whether you can claim that it is ona’ah (exploiting).
The answer to this is that it depends. Employees who are paid by the hour are, for ona’ah purposes, treated like slaves since they have sold their time, and the Torah excludes slaves from the halachos of ona’ah (C.M. 227:33). [Although the halachos of ona’ah do not apply, the prohibition of ona’ah applies (Pischei Teshuvah 227:21) as does the prohibition of geneivas da’as (Sma 227:33)]. If the employee is an independent contractor and has the freedom to do the job whenever he pleases (even though there is a deadline when the job must be completed), he is not considered a slave and the laws of ona’ah do apply (C.M. 227:36; cf. Rav Akiva Eiger, ibid.).
This article is intended for learning purposes and not to be relied upon halacha l’maaseh. There are also issues of dina d’malchusa to consider in actual cases.
Rabbi Meir Orlian is a faculty member of the Business Halacha Institute, which is headed by HaRav Chaim Kohn, shlita, a noted dayan. For questions regarding business halacha issues, or to bring a BHI lecturer to your business or shul, please call the confidential hotline at 877-845-8455 or e‑mail firstname.lastname@example.org. To receive BHI’s free newsletter, Business Weekly, send an e‑mail to email@example.com.