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When "Uncapped Commissions" Are a Lie: How Tech Giants Get Away With Withholding Sales Pay

  • Writer: Tsahala David
    Tsahala David
  • Jul 21
  • 2 min read

Imagine this:You’re a top performer at a major tech company. You crush your quota. Not just a little—692% of target. According to the comp plan, you should earn close to $1 million in commission.

But instead, you receive a fraction. No warning. No explanation. And when you ask why, you’re told:

“The plan was always subject to change. It’s not a contract.”

This isn’t a hypothetical.

This is what happened to Richard Martignetti, a veteran IBM sales executive. After closing $34 million in SaaS deals—over 6x quota—IBM retroactively capped his commissions at 300% and paid him far less than promised. His team got full payouts. He didn’t.


🧨 The Loophole: Commission "Plans" That Aren’t Contracts

IBM, like many tech giants, issues annual commission plans filled with charts, formulas, and enthusiastic language like “uncapped earnings.”

But buried in the fine print?Disclaimers like:

  • “This plan does not constitute a contract.”

  • “IBM may adjust, cancel, or cap commissions at its sole discretion.”

  • “Progress reports are for informational purposes only.”

And the kicker:

Even after a deal closes, is approved, and paid by the customer, IBM can retroactively reduce your commission if they deem it “disproportionate.”

So what looks like a guaranteed comp structure is actually a non-binding policy. Legally, it’s more like a suggestion. Courts have upheld that unless there’s a clear, enforceable promise, commissions are not “wages” under many state laws—including Maryland, where Martignetti sued.


⚖️ The California Exception

California is one of the only states where this loophole is closed.

Since 2013, California law requires employers to provide:

  • Written, signed commission agreements

  • That clearly state how commissions are earned and paid

  • And that are legally enforceable

That’s why Oracle, which operates heavily in California, recently settled a $15.5 million lawsuit over similar commission manipulation tactics.

In California, if a company promises uncapped commissions and later caps them without clear contractual terms, that’s illegal.


What This Means for You

If you’re a salesperson:

  • Read the fine print of your comp plan. Is it enforceable? Or full of discretion?

  • Get written confirmation of any promised commissions—especially on large deals.

  • Track everything. Document what was promised, what was sold, and when.


If you lead a sales team:

  • Stop calling it a "plan" if it’s not a promise.

  • If you're in California, get legal help to ensure your plans are compliant.

  • Recognize that vague or changeable comp plans are not just bad policy—they're a lawsuit waiting to happen.


🚀 CEOs: Your Commission Plan Is Your Strategy in Disguise

If your commission plan is vague, discretionary, or riddled with exceptions You're crippling performance and killing trust on your sales team.


If you want a comp plan that actually drives the right behavior and delivers results—without exposing you to legal risk—I can help.

📩 DM me or reach out to talk about designing commission structures that align incentives, protect your business, and unlock growth.



Sources:

📍 IBM – Multiple lawsuits over “uncapped” commissions that weren’t https://milberg.com/case/ibm-sales-commission-lawsuit/


 
 
 

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