Location: Arizona
TL;DR: Former employer says I owe them $14,000 in “unearned” commissions after leaving my insurance broker job. I’m in Arizona. Not sure this is legit or enforceable.
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I recently left my job as a commercial insurance broker in Arizona. One of the many reasons I left was the complicated and frankly frustrating commission structure. It was based on a yearly “draw” system where you’re technically paid a salary in advance, then have to “earn” it back via commissions.
Fast forward to now — I just got an email from the SVP of Finance saying I owe them $32,000, but they’re “willing to settle” for $14,000. They pointed to a clause in my employment agreement that apparently gives them the right to do this.
Their Reasoning:
They claim I sold policies that haven’t been “earned” yet because the clients are still making payments (many clients financed their premiums). Basically, they’re saying if a client hasn’t paid the full premium yet, that commission isn’t technically mine.
Some Numbers:
• From Jan–June, I sold ~$1.6M in premium.
• That generated ~$160,000 in revenue for the company and ~$55,000 in commission for me. (Not that I ever saw this amount lol)
• Since I was on a monthly draw of $4,166, my “salary” during that time was ~$25,000 for Jan-June
• That left me with ~$30,000 in commission I was able to withdraw.
• Total deposited to my bank (after taxes) from Jan–June: $38,329.66. I left some money in my commission “bank” with my agency Incase of a slow month, and I knew I was planning on leaving.
When I left, my draw was fully paid back and I had no negative balance during my last month, I also had no remaining commission to withdraw.
How the Structure Worked:
• Each month starts with a negative balance (your draw).
• If you sell enough, you earn that back + commission.
• Only if you’re in the positive (draw covered) can you actually withdraw anything.
• If you had a slow couple months, the draw becomes “debt” and stacks until you sell enough again, and cover whatever your negative draw balance was.
This year, I had a few great months. I withdrew what I had earned (and was allowed to). I used it to cover some major expenses.
The Part That Doesn’t Make Sense:
They’re now saying I owe $14k because some of my commission was unearned. But:
• Many of those policies are still active, 90-100+ days In effect.
• These policies were with established businesses — not likely to cancel or default.
• Some of the policies are actually going to cost more than estimated (e.g., usage-based policies where the client’s usage is higher than projected). That means more commission/revenue, not less — so will I get paid the extra if that happens?
It feels like they’re trying to claw back money that was, by all accounts, earned and paid.
Here is the email they sent me, x’d out names of course.
I’ve attached your commission agreement that outlines earned vs. accrued commissions thru your termination date (highlighted in blue). For example, POLICY HOLDER, total premium on the New Business was $282,337. Your annual New Business Commission was $11,293.48. The effective date of this policy 4/25, meaning only ~80 days was earned (from your resignation date of 6/30). For this account, your total earned commission was $2,537.17. Meaning, $8,756.31 is owed back to THE AGENCY. Based on this calculation your commissions owed back to AGENCY are $32,312.40 for 2025 policies (see attached spreadsheet). With that being said, we are currently willing to settle for you to return your last commission withdraw of $13,909.25. Once this is received, we will reverse the last payroll to ensure your W-2 will be accurate for 2025. Payment is expected within 7 days unless other arrangements are made.
Has anyone else dealt with something like this? Can they legally do this? What are my options here? I can copy my agreement if that helps.
Comments
> They claim I sold policies that haven’t been “earned” yet because the clients are still making payments (many clients financed their premiums). Basically, they’re saying if a client hasn’t paid the full premium yet, that commission isn’t technically mine.
Most big industries (software, insurance, etc.) have commissions structured like this. For why, you can look at lawsuits (like Vivint’s, to name one example) where sales reps knew what counted as an “earned” commission and paid customer premiums in order to earn their own commissions (which were in excess of the premiums paid).
So clawbacks are legal. Draw-based commissions schemes are legal.
> Many of those policies are still active, 90-100+ days In effect
You’re fundamentally asking a math question, and in some cases I’ve seen the clawback period go up to 180 days ago. And “many” is not “all” – if you had a couple big customers cancel, you could be back in the negative. Some places to pro rata commissions, or accelerators at renewal, or a variety of other things.
You need to look at your commissions structure and ask for an accounting of where each of the accounts you sold is with respect to its standing. That’ll let you know what’s going on; moreover, you’re going to need that to make any kind of claim with an attorney in the future.
To head off anyone else who might suggest it: OP’s state department of labor will not help with this. OP is almost certainly FLSA exempt, and DoL’s do not handle unwinding complex commission structures unless we’re talking retail-level stuff that would have pushed the employee below minimum wage.
OP can contact an attorney, but the first thing that attorney will ask for are the commissions plan and then an accounting of accounts sold within the clawback period by OP.