Understanding Commission Pay and Bonus Disputes
Disputes over commission pay and bonuses are frequent areas of conflict between employees and employers. These disputes can arise in sales, marketing, and other roles where compensation is partially or entirely based on performance. If you’re working on commission or are eligible for bonuses, understanding your rights and how to handle pay disputes is crucial.
What Is Commission Pay?
Commission pay is a form of compensation based on an employee’s performance, usually sales or other productivity-based tasks. Instead of receiving a fixed salary, employees who earn commissions are typically paid a percentage of their sales. For example, if you are a salesperson selling cars, your employer may pay you a 10% commission on each sale.
What Are Bonuses?
Bonuses are additional payments that employers provide to reward employees for achieving specific goals, such as hitting sales targets, completing a project successfully, or working for the company for a specified period. Similar to commissions, bonuses are often tied to objective criteria, like meeting quarterly sales goals.
What Are the Differences Between Commission Pay and Bonuses in California?
Although both bonuses and commission pay can incentivize performance, the key difference is that commissions are typically tied directly to specific tasks or performance metrics. Commissions are contractual obligations, meaning that once you perform the required work, the employer must pay you the agreed-upon commission. Bonuses, however, can be discretionary, where the employer chooses to provide a bonus, or non-discretionary, where the employer is obligated to pay a bonus if certain conditions are met.
Which Key California Laws Govern Commission Pay?
California has strict regulations to protect employees from unfair compensation practices. The primary law regulating commission-based compensation is California Labor Code § 2751, which requires employers to provide a written agreement to employees who are paid commissions. The written agreement must specify how commissions are calculated and paid. The employer must also provide the employee with a copy of the agreement and obtain their signature. Any changes to the commission structure must be provided in writing.
When Must Commissions Be Paid?
Under California law, earned commissions must be paid in a timely manner. Typically, commissions are earned when the employee completes the work that entitles them to the commission, such as closing a sale. Employers cannot delay payment of earned commissions and must pay them at the same time as regular wages.
Are Bonuses Regulated Under California Law?
While bonuses are generally more flexible than commissions, they are still subject to California’s wage and hour laws. The most important distinction to make is between discretionary and non-discretionary bonuses.
Non-Discretionary Bonuses
Non-discretionary bonuses are those that employees are entitled to once they meet specific criteria, such as reaching a sales goal or completing a project. These bonuses are considered part of an employee’s regular wages and must be included in the calculation of overtime pay.
Discretionary Bonuses
These are voluntary and given at the employer’s discretion. For example, an employer may offer a holiday bonus or a one-time performance bonus that they are not required to provide. Discretionary bonuses do not need to be included in overtime calculations, as they are not tied to specific performance metrics.
What Are Common Causes of Commission and Bonus Disputes?
Disputes over commission pay and bonuses often arise when employers fail to follow the terms of the agreement or when there is ambiguity about how commissions and bonuses are calculated. Employers may try to alter the terms of the commission or bonus plan without notifying employees, leading to disputes over unpaid amounts. Disputes can also occur if there is confusion over how a bonus is calculated, especially if bonuses are tied to complex metrics like company profits or individual performance.
Steps to Resolve Commission and Bonus Disputes
If you believe you are owed commission or bonus pay that your employer is refusing to pay, there are several steps you can take to resolve the issue.
- Review the Written Agreement—Review your commission or bonus agreement to ensure you fully understand the terms. Look for specific details about how commissions or bonuses are calculated, earned, and paid.
- Communicate With Your Employer- Bring the issue to your employer’s attention in writing. Clearly outline your concern, reference your written agreement, and request payment for the unpaid amount.
- Keep Detailed Records- Keep records of all relevant communications with your employer, along with documentation of your sales, performance metrics, or other factors that affect your commission or bonus. This can be useful if you need to take further action.
- Contact a Labor Attorney- If your employer refuses to pay you what you are owed, consulting with a labor attorney specializing in wage disputes may be necessary. An attorney can help you evaluate your legal options and, if necessary, file a lawsuit to recover your unpaid wages.
What Are Legal Remedies for Unpaid Commissions and Bonuses
California law vigorously protects employees owed wages, including commissions and bonuses. If your employer fails to pay you what you are owed, you can file a wage claim with the California Labor Commissioner. You can also file a civil lawsuit against your employer for breach of contract, unpaid wages, and other damages.
Having Issues with Commission or Bonus Pay? Justice Law Corporation Is Here to Help!
If you’re facing a dispute over unpaid commissions or bonuses in California, we’ve got your back! At Justice Law Corporation, our experienced labor law attorneys protect employees’ rights—and we speak Spanish to better serve you. You have rights, and we’re here to enforce them. Contact us at 818-412-9470. Get in touch for a free consultation!
