Commission Pay

Employees who are paid by commissions must enter into an agreement with their employers establishing what the terms are for their commission pay. However, sometimes employers do not fully honor that agreement, leading to employees not being adequately compensated. Commission-based employees deserve to be paid for their work as much as employees under any other employment model do. If you feel as if you have not been paid appropriately, the Orange County commission pay attorneys at the Serendib Law Firm can help you determine what you are owed. Please contact contact our office today to speak with an attorney about your legal rights and options.

‘Sales commissions’ are sums of money that are paid to employees once they have completed a certain goal. Usually, these goals are to sell a certain amount of product or provide a certain amount of services. Commissions are either offered as incentives to increase an employee’s production or as the primary method of payment for their position. The basis for sale commissions consists of one of the following types:

• Sale price percentage
• Sale profit percentage
• A fixed amount per each sale

Sales commissions may also be a mixture of any of the above models. Under the California Labor Code, sales commission employment contracts must be in writing and establish the method to be used to compute and pay commissions. This requirement helps prevent employers from taking advantage of commission-based employees to deny them proper pay. Orange County employees should consult a knowledgeable commission pay lawyer if they believe they are being denied the wages they are due.

The commissions contracts employees and employers enter into must also establish when a commission has been ‘earned,’ usually either at the point of sale or once payment by the costumer has been made. Payment of earned sales commissions also must be made in a ‘timely’ manner, which requires employers to payments to their employees at least twice a month on designated paydays.

Employers may not make deductions for their costs of doing business from employees’ sales commissions. An exception to this is if an employer can show that an employee had caused such a loss due to dishonest or willful behavior, or negligence. For retail, employers are also allowed to deduct past commissions earned on returned merchandise from future commissions, but only if appropriate tracking measures are in place to show the same employee originally sold the returned product. Any allowable deductions must be plainly set out in the written employment agreement.

Another issue that may arise in commission pay situations is misclassification of an “outside” or “inside” sales position. An experienced Southern California commissions pay attorney can help you determine whether you’ve been properly classified. ‘Outside’ salespeople are exempt from certain requirements under California law, such as those pertaining to minimum wage and overtime. Outside salespeople are defined as employees who spend over half their working time away from an employer’s place of business “selling tangible or intangible items or obtaining orders or contracts for products, services or use of facilities.”

The California Labor Code also requires employers to pay all earned wages to employees immediately if the employee is terminated. In the event of a resignation, an employee is owed their wages within 72 hours of when notice is given. Additionally, the terms of a commissions contract cannot be retroactively altered. Circumstances allowing an employer to issue future changes to a commission plan may be established in the agreement, however, any discretionary power to make these changes cannot deny an employee’s overall commission benefits.

At the Serendib Law Firm, we are dedicated to ensuring our clients’ rights as employees and work tirelessly to make sure they are fully protected and advocated for. If you believe your employer is either violating the terms of your employment contract or otherwise denying you proper wages, our Orange County commissions pay attorneys can assist you with your claims. Our firm represents clients throughout Southern California, which includes Orange, Los Angeles, San Bernardino, and Riverside Counties. If you need legal advice regarding for commissions pay, or with any other employment law matter, please contact our office today at 1-800-LAW-8225 (800-529-8825) or online to find out more about our services.