California Unpaid Commission Attorney

California employers generally must put commission agreements in writing when an employee performs services in California and the compensation method involves commissions.

The agreement must explain how commissions will be computed and paid. The employer must provide the employee with a signed copy and obtain a signed receipt. When an agreement expires but the parties continue working under its terms, those terms are presumed to remain effective until a new agreement replaces them or employment ends.

• A compliant agreement should clearly address issues such as:
• How commission amounts are calculated
• When a commission becomes earned
• When payment will be made
• Whether customer payment is required
• How split commissions are allocated
• Whether returns or cancellations permit chargebacks
• What happens when employment ends
• How changes to the plan will be communicated

A missing or unclear written agreement can create serious disputes, but it does not automatically mean the employee loses the right to earned compensation.

The written commission agreement usually determines what an employee must accomplish before a commission becomes earned.

Depending on the plan, the required event may be:

• The customer signing a contract
• The employer approving the sale
• Delivery of a product or service
• Completion of installation
• The customer making payment
• Expiration of a cancellation period
• Satisfaction of another lawful condition

An employer generally cannot refuse to pay a commission after the employee has completed all required conditions merely because payment is inconvenient or employment has ended.

Disputes frequently arise when the agreement is vague, the employer applies an unwritten condition, or the company changes its interpretation after the employee completes the sale.

Retroactive Changes to the Commission Plan

An employer may be able to revise a compensation plan for future work, but it generally should not retroactively change the formula or conditions for commissions employees have already earned.

Potential problems include:

• Lowering the rate after a sale closes
• Adding a new payment condition after the work is complete
• Changing a territory after the employee generated the account
• Applying a new plan to earlier sales
• Declaring an earned commission discretionary
• Refusing to honor the plan in effect when the sale was made

Failure to Credit the Employee for a Sale

An employer may claim that another employee deserves credit even though the original salesperson developed, negotiated, or completed the transaction.

These disputes may involve:

• Reassigned customer accounts
• Sales completed by multiple employees
• Territory changes
• Team-based compensation
• Leads transferred shortly before closing
• Management taking credit for subordinate employees’ work
• Sales entered under another person’s identification

The written agreement, sales records, emails, customer communications, and past company practices may help establish who earned the commission.

Improper Commission Chargebacks

Some commission agreements permit limited chargebacks when a customer cancels, returns a product, or fails to pay.

A chargeback may be disputed when:

• It is not authorized by the agreement
• The employer applies it inconsistently
• The customer’s nonpayment was not the employee’s fault
• The employer deducts more than the original commission
• The employer applies the chargeback to an unrelated sale
• The employer changes the policy after the commission was earned
• The deduction violates California wage-deduction rules

The legality of a chargeback depends on the agreement and the circumstances.

Delayed Commission Payments

An employer may delay payment because it has not completed its internal accounting or because the customer has not yet satisfied a lawful condition.

However, once a commission is earned and calculable, the employer generally must pay it according to applicable payday and final-pay requirements. California generally requires wages to be paid on established regular paydays, subject to specific exceptions.

Potentially, yes.

Employment ending does not automatically erase commissions earned before termination. If the commission was fully earned on or before the final day of employment, it generally must be included in final wages.

The California Labor Commissioner states that earned commissions must be calculated and paid at termination when the amount is already earned and ascertainable. If a lawful condition has not yet occurred, such as receipt of customer payment, the commission must be paid promptly once that condition is satisfied.

Whether a commission is owed may depend on:

• The language of the commission agreement
• Whether the employee completed the required sales work
• Whether the customer signed or paid
• Whether another employee performed substantial work after departure
• Whether the employer imposed a lawful condition
• Whether the employer is attempting to cause forfeiture of earned wages

An employer should not be able to avoid paying an earned commission simply by terminating the employee shortly before the ordinary payment date.

California’s final-pay rules depend on how employment ends.

An employee who is discharged generally must receive all earned and ascertainable wages at termination. An employee who resigns after giving at least 72 hours’ notice generally must be paid on the final day. When an employee resigns without that notice, final wages are generally due within 72 hours.

For commission employees:

• Commissions already earned and calculable should generally be included in final pay.
• An employer may not simply wait until its next routine commission-pay date.
• A commission dependent on an incomplete lawful condition may become payable when that condition occurs.
• The employer should calculate and pay the amount promptly once it can be determined.

Special rules may apply to certain industries, collective bargaining agreements, or compensation arrangements.

Potentially.

When an employer willfully fails to pay all wages due at the end of employment, California law may allow waiting-time penalties based on the employee’s daily rate of pay for up to 30 calendar days.

Because commissions are wages once earned, unpaid final commissions may support such penalties when the legal requirements are met. A genuine good-faith dispute over whether the commission was earned may affect whether waiting-time penalties are available.

The employee may also be entitled to:

• The unpaid commission
  Interest
• Wage-statement penalties when applicable
• Statutory penalties authorized by law
• Attorney’s fees and costs when recoverable
• Other damages arising from related claims

They can.

For a nonexempt employee, nondiscretionary commissions may need to be included in the employee’s regular rate of pay when overtime is calculated. Failing to include commission compensation may result in underpaid overtime even when the employee received the stated commission amount.

Some commissioned sales employees may qualify for a specific overtime exemption, but the employer must satisfy every requirement of the applicable exemption. Paying commissions by itself does not automatically eliminate overtime rights.

Useful evidence may include:

• The written commission agreement
• Prior versions of the compensation plan
• Offer letters
• Pay stubs and commission statements
• Sales reports
• Customer contracts
• Invoices and payment records
• CRM records
• Emails and text messages
• Territory assignments
• Account lists
• Records showing when a transaction closed
• Communications concerning chargebacks
• Statements explaining why payment was denied
• Evidence showing how comparable commissions were paid

California employers are responsible for maintaining payroll records and providing itemized wage statements. Employees should still preserve their own lawful records whenever possible.

Do not take confidential customer information or access company systems after your authorization ends.

Yes. Unpaid commission disputes may result from a compensation policy applied across an entire sales team or workforce.

Examples may include:

• A companywide retroactive rate reduction
• The same unlawful chargeback policy
• Failure to pay commissions after termination
• Exclusion of commissions from overtime calculations
• A common practice of reassigning sales before payment
• Failure to provide written commission agreements
• The same improper deduction applied to multiple employees

When common policies affect numerous employees, a class or coordinated action may be appropriate.

An employer cannot lawfully punish an employee for engaging in protected wage-related activity, including requesting earned compensation, filing a wage claim, or participating in an investigation.

Potential retaliation may include:

• Termination
• Reduced sales opportunities
• Reassignment of accounts
• Lower commission rates
• Threats
• Unsupported discipline
• Harassment
• Negative references
• Pressure to withdraw a claim

A retaliation claim may be separate from the underlying commission dispute.

Depending on the circumstances, an employee may:

• Make a written demand for payment
• File a wage claim with the
• California Labor Commissioner
• Pursue a civil lawsuit
• Proceed through arbitration when required
• Bring or join a class-based claim

The Labor Commissioner adjudicates claims for unpaid wages and may hold a settlement conference and administrative hearing when the matter is not resolved.

The most appropriate option may depend on the agreement, amount owed, evidence, number of employees affected, applicable deadline, and whether other wage violations are involved.

Consider taking these steps:

• Save the commission agreement and every revised version.
• Preserve pay stubs and commission statements.
• Record the sales and accounts for which payment is missing.
• Save customer contracts and communications you lawfully possess.
• Document when each required sales condition was completed.
• Request a written explanation for the denial or reduction.
• Preserve evidence of retroactive plan changes or chargebacks.
• Review your final paycheck carefully after leaving.
• Do not sign a release or severance agreement without reviewing it.
• Contact an employment attorney promptly because filing deadlines apply.

Unpaid commission claims often turn on detailed compensation language, sales records, payroll calculations, and the employer’s past practices.

The Kaufman Law Firm may assist by:

• Reviewing the written commission agreement
• Determining when commissions became earned
• Investigating retroactive plan changes
• Evaluating denied sales credit and chargebacks
• Calculating unpaid commissions and overtime
• Reviewing final-pay obligations
• Assessing waiting-time and other penalties
• Determining whether other employees were affected
• Evaluating retaliation or wrongful termination
• Pursuing available relief through negotiation, administrative proceedings, arbitration, or litigation

The Kaufman Law Firm has represented California employees since 1993. Attorney Matthew A. Kaufman brings decades of experience to unpaid commission, wage and hour, retaliation, and employment class action matters.

Clients turn to our firm for:

• Personalized attention from an experienced employment attorney
• Careful review of commission plans and sales records
• Experience with individual and class-based wage disputes
• Clear explanations of potential claims and options
• More than $50 million recovered for clients
• Free case evaluations