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Sharing Brokerage Commissions in the Absence of a Compensation Agreement

What kind of compensation is a worker entitled to if he or she never worked out a compensation agreement with his or her employer? Schiff v. Chester (an anonymized decision posted today on the Beth Din’s website) is a case of two real estate agents who worked together to procure properties but never discussed with each other how they would share commissions. Jewish law provides that in the absence of a compensation agreement, a worker is entitled to receive ke-minhag ha-medinah, ke-pachut she-ba-po’alim, the lowest level of a wage that a comparable person would accept for comparable work.1 This rule is consistent with a general principle in Jewish law that a worker is entitled to be compensated for a benefit he confers even in the absence of a contract. 2 In effect, Jewish law generally holds a beneficiary of work presumptively liable to pay for a conferred benefit unless he can show that the worker did not confer a bona fide benefit or that the worker waived his right to compensation. 3

Chester, who had considerably more experience working in the industry than Schiff, had approached Schiff about working with him to procure properties in Miami for an overseas buyer. They closed three deals, earning about $676,000 in commissions. Schiff argued that he was very much involved with these deals and that he was a full partner with Chester and therefore entitled to 50% of the commissions. Chester argued that Schiff was only minimally involved with these deals and was certainly not the “procuring cause.”

Schiff v. Chester asked the dayanim to determine appropriate compensation for Schiff consistent with the minhag ha-medinah of the industry. The dayanim determined (in consultation with experienced brokers in the New York market, utilizing a process for ex parte investigation that was discussed with the parties) that splitting brokerage commissions is the predominant form of compensation for brokerage professionals working together as well as for referrals from one professional to another. Common percentages range from 10% to 25%, and reach up to 50% for relationships representing equal partnerships.

The dayanim considered several factors in deciding what percentage to award Schiff. They considered the amount of work that Schiff put into the deals. They raised the equitable consideration that Schiff attempted to clarify how the commissions would be split but was repeatedly frustrated by Chester who told him to focus on getting deals done rather than worrying about commission splits. They also considered the fact that Schiff bears the burden of proof as claimant (ha-mozi mei-chaveiro alav ha-raya).

Note how the dayanim cite New York case law to establish the relevant commercial custom. Under New York law, a brokerage commission is not due unless the broker seeking the commission was the “procuring cause” of the sale. Chester argued that Schiff was not the procuring cause of these deals and therefore was not entitled to any commission. The dayanim appeal to case law to establish that the procuring cause standard applies to contracts “between the broker and the principal” but not necessarily to the “contract between the salesperson and the broker.” 4

Schiff v. Chester can be accessed here.

To see other anonymized decisions of the Beth Din of America click here.

  1. Shulchan Arukh Choshen Mishpat 332:1, Pitchei Choshen Sekhirut 8:4.
  2. Bava Mezia 101a, Shulchan Arukh Choshen Mishpat 375, Pitchei Choshen Geneivah ve-Onaah 8:15-25
  3. See Pitchei Choshen Sekhirut 8:31-35.
  4. Greendlinger v. Donahue Real Estate, Inc., 798 N.Y.S.2d 344 (Kings.Co. S.Ct. 2004).

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