Commissions are not optional payments that employers can choose to make (or not) on a whim. They are a significant part of compensation for many working people in sales and related positions. In California, they must be paid when they are earned.
If you are owed unpaid commissions, a California unpaid wages lawyer at Justice Law Corporation can help you fight back to get the money that you earned. We are seasoned attorneys who have dedicated our careers to representing working people in pay disputes, discrimination cases, and other matters. Our lawyers advise employees in a broad range of industries and jobs who have been ripped off by their bosses.
Sadly, many employers use a variety of tactics to back out of paying commissions. The good news is that California law gives workers strong rights and protections regarding full payment for their work. And you do not have to go through the process of filing an unpaid wages claim alone.
You did the work, hit the number, or closed the deal. Now you are still waiting on the commission you were promised. Here is what you need to know.
Was the Commission Earned?
This is the central question in most disputes over unpaid commissions. The answer depends heavily on the terms of the agreement and the specific factual circumstances.
California law makes commissions legally protected as unpaid wages once they are earned, meaning that you have satisfied whatever conditions were required to trigger payment. This may be when:
- You close the deal
- The customer signs the contract
- The customer actually pays, or
- The product ships, or the service is delivered
Your employer cannot simply take back or withhold a payment because they change their mind, overhaul their pay plan, or decide you no longer deserve the commission.
The specific terms of the agreement are crucial. Your employer is legally required to put the commission plan in writing and give you a signed copy. The agreement must spell out how commissions are calculated, when they are considered earned, and when they will be paid out.
Some commission-based workers find this out too late: They take employers at their word, relying on verbal promises or vague references to results-based pay in offer letters. Certain employers keep the terms purposely ambiguous to string workers along or shortchange them when it comes time to pay up. Fortunately, courts tend to resolve ambiguity in the employees’ favor. They can review emails, texts, pay stubs, and past practices to determine what was actually promised.
How Employers Try to Avoid Paying Commissions
Employers use various tactics to avoid paying commissions or to reduce what they fork over. Whether these moves are legit depends largely on what is in the agreement.
Changing the Commission Agreement Terms
Once a commission is earned under the terms in place at the time, it generally cannot be clawed back by a later change. That does not stop employers from trying, however.
Employers sometimes look to revise commission terms retroactively. Take, for example, an employer who says that, after a worker has already closed a sale, it will not pay the commission until the customer pays for the product or service. If the employer initially said it would pay the commission only after the customer signed the contract, it cannot renege on this pledge.
In other cases, an employer may try to reduce the commission rate after the fact. This is also not likely to fly under California law.
Requiring Continued Employment
Some commission plans state that employees must be employed on the commission payment date to receive a commission. Employers will sometimes argue that an employee forfeited their commission by leaving, even if that is not spelled out in the commission agreement.
Once a commission is earned, it cannot be forfeited or clawed back. If the commission plan states that the commission will be paid upon the closing of a deal, the employer must pay it after the deal closes. It does not matter whether the worker has resigned, been fired, or been laid off after the deal is closed and before the commission is paid.
‘Draw Against Commission’ Pay Schemes
Some employers will permit commissioned employees to receive wages in advance against future commissions. While this is generally permitted, employers cannot use these schemes to pay workers below the required minimum hourly wage rate. Even straight-commission employees must be paid at least the minimum wage for every hour worked.
Reassigning Accounts or Customers
This is a common source of commission disputes: An employer reassigns an account after a salesperson has already developed a relationship with a customer and the deal is nearly complete.
Employers generally have the right to reassign accounts and refuse to pay commissions to the original salesperson if the plan specifically spells out that reassignment cuts off the original salesperson’s commission on that account. But there are several restrictions on these kinds of moves.
Employers cannot use reassignment to avoid paying commissions that have already been earned. For example, if the deal has already closed, the commission plan requires payment upon the close of the deal.
It gets trickier in situations where the person handling the account has cultivated a relationship, negotiated a deal, or brought the customer to the point of closing, only to be reassigned shortly before the payment triggers. Courts are often skeptical of employers who try to wriggle out of commission payments in these scenarios. The closer the deal was to being earned, the stronger your argument that the reassignment was a pretext to avoid paying you.
State law also requires California employers to act in good faith. If your employer reassigns an account specifically to deprive you of a commission you were about to earn, that can be treated as a breach of the agreement, even if your employer technically had the discretion to reassign accounts.
Speak With a California Unpaid Wages Lawyer
If you believe that your employer is violating your rights on the job, whether it is by shorting you on commissions or in other terms and conditions, you do not need to go it alone. A California unpaid wages lawyer at Justice Law Corporation can help you evaluate your claim and understand your rights and options.
Contact us at (818) 230-7502 to schedule a free consultation with a California unpaid wages lawyer.
