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Dealer Program charge backs and can you pass it on to commissioned salesman
May 16,2022
Dealer Program charge backs and can you pass it on to commissioned salesman
          We are a dealer for an alarm dealer program where the Program buys our customer contracts as we sell and install them.  We have to guarantee the purchased account for 1 year, or it will be charged back.  We have a continued flow of accounts so charge backs are deducted from new sales. 
          We employ commissioned sales people.  What is the best way in writing to make the salesman responsible for the account, and if he disappears, would the signed paperwork be valid for me, to take him to court?  Our salesmen are W2 employees paid by commission. 
Name withheld
          I suppose you already know that you are building equity for the Program, not your company, unless the Program assigns the contract to you after a number of years based on how much it paid you for the account. 
          You need to be particularly careful with this type of arrangement [Program] because things seem to run smoothly with you getting a positive cash flow while you continue selling for the Program.  However, if you stop selling for the Program you are going to get hit with charge backs for the last year of sales, which could be significant.  You may also owe the Program for back charges that were under dispute or not yet charged to you because you were still “performing” in the program.  But once you announce that you’re terminating the relationship, or it becomes apparent that you aren’t selling new accounts, the Program is going to do a final audit and get very serious about collecting the back charges. 
          How can you pass the back charge on to your salesman?  You may not be able to, especially if the salesman is a W2 employee.  It likely depends on the Employment Agreement you have with the salesman and how the commission structure is designed.  A draw against commission is a start, but you will likely require very particular wording in the Employment Agreement.  Your state may also have laws that limit or prohibit a charge back to the employee.  You may be able to get around employee issues by using Independent Sales Affiliates, with 1099 relationship, with carefully drafted Independent Sales Affiliate Agreement.
          K&K offers Standard Form Employment Agreement and an Independent Sales Affiliate Agreement.  You should also be sure to consult with either K&K Employment Group or an employment attorney to be sure you have structured and worded the agreement properly.

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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301