In the bustling world of employment, especially in sales-centric industries, the concept of commissions plays a pivotal role in incentivizing employees and driving sales. However, what happens if your employer decides to revoke or reduce your commission payments? Are they legally entitled to do so? Understanding your rights under California law regarding commissions is crucial for safeguarding your earnings and ensuring fair treatment in the workplace.
What Counts As A “Commission” Under California Law?
First and foremost, it’s essential to define what constitutes a commission under California law. Generally, a commission is a form of compensation paid to employees for services rendered, typically based on a percentage of sales revenue generated by the employee. Commissions are common in industries such as real estate, retail, and automotive sales commission, where employees play a direct role in generating revenue for the company.
In California, commissions are governed by specific laws and regulations outlined in the California Labor Code. According to California employment law, commissions are considered unpaid wages, and employees are entitled to receive them in a timely manner as part of their compensation package.
Can an Employer Take Away Your Commission?
No, under California law, an employer generally cannot take away commissions that have already been earned by an employee. However, there may be circumstances where an employer can adjust or withhold commissions if it’s outlined in the employment contract and done in accordance with legal requirements.
When is an Employer Allowed to Take Away Commission Payments?
While commissions are generally protected under California law, there are certain circumstances in which an employer may be permitted to withhold or reduce commission payments. These situations typically arise when:
Written Agreement: If there is a written contract between the employer and the employee that outlines the terms and conditions under which commissions may be adjusted or withheld, the employer may have the legal right to do so as long as they adhere to the terms of the agreement.
Performance-Based Conditions: Some commission agreements may be contingent upon specific performance metrics or conditions being met by the employee. If an employee fails to meet these conditions, the employer may have grounds to withhold or reduce commission payments.
Employer’s Discretion: In certain cases, an employer may retain the discretion to adjust commission payments, provided that it is not done arbitrarily or in violation of any employment contracts or agreements.
Payroll Tax Deductions: Employers may adjust commission payments to accommodate payroll tax deductions mandated by state and federal laws. Understanding these deductions is crucial for both employers and employees to ensure compliance and accurately calculate net commission amounts.
Employee’s Simple Negligence: If an employee’s negligence directly leads to the loss of a sale or a customer and increases general business expenses, resulting in the forfeiture of commission, the employer may withhold or reduce commission payments accordingly.
When are Employers Not Allowed to Take Them Away?
Despite the aforementioned circumstances where employers may have the right to withhold or reduce commission payments, there are strict limitations imposed by California law to protect employees’ rights. Employers are not allowed to take away commission payments in the following scenarios:
Violation of Employment Contract: If the employer breaches the terms of the employment contract or commission agreement, they cannot unilaterally withhold or reduce commission payments.
Minimum Wage Requirements: Commission payments are subject to California’s minimum wage laws. Employers must ensure that commission payments, when combined with base wages, meet or exceed the applicable minimum wage rates set forth by state and federal laws.
Unpaid Commissions: Employers are prohibited from withholding or failing to pay earned commissions to employees upon termination of employment, regardless of the reason for termination.
Changes to Commission Structure or Agreement: Employers cannot unilaterally modify commission structures or agreements retroactively without the employee’s consent. Any changes must be made prospectively and communicated clearly to the employee in writing.
What is a Commission Agreement?
A written commission agreement is a legal contract between an employer and an employee that outlines the terms and conditions governing commission payments. This agreement typically includes details such as the commission rate, performance metrics, payment schedule, and any conditions or circumstances under which commission payments may be adjusted or withheld.
Can My Employer Make Changes To The Commission Structure Or Agreement?
In California, employers have the right to modify commission structures or agreements, but any changes must be made in accordance with state law and the terms of the existing agreement. Employers cannot make changes to commission agreements retroactively, and any modifications must be communicated to the employee in writing.
What About the Minimum Wage?
It’s essential to understand that commission payments are subject to California’s minimum wage laws. Employers must ensure that commission payments, when combined with base wages, meet or exceed the applicable minimum wage rates established by state and federal laws.
If an employee’s commission earnings do not meet the minimum wage requirements for the hours worked, the employer is obligated to make up the difference to ensure that the employee receives at least the minimum wage for all hours worked.
What Can I Do to Recover Commission Payments That Were Taken From Me?
If you believe that your employer has unlawfully withheld or reduced commission payments, you have several options for seeking recourse:
Consult with an Experienced Employment Attorney: A knowledgeable employment attorney can assess your case, review your commission agreement, and advise you on the best course of action to recover unpaid commissions.
File a Wage Claim: You can file a wage claim with the California Division of Labor Standards Enforcement (DLSE) to seek recovery of unpaid commissions. The DLSE will investigate your claim and may initiate legal proceedings against your employer if warranted.
Negotiate with Your Employer: In some cases, a direct negotiation with your employer may lead to a resolution without the need for legal action. Be prepared to present evidence supporting your claim and advocate for your rights.
Consider Legal Action: If all other avenues fail, you may choose to pursue legal action against your employer by filing a lawsuit for breach of contract or violation of California labor laws.
What Happens If I Am Fired Or Leave While Commissions Are Pending?
If you are terminated or voluntarily leave your employment while commissions are pending, your employer is still required to pay you any earned commissions according to the terms of your commission agreement and California law. Employers cannot withhold or forfeit earned commissions as a form of retaliation or punishment for leaving the company.
How to Protect Yourself Against Unpaid Commission?
To protect yourself against unpaid commissions, consider taking the following steps:
Review Your Commission Agreement: Carefully review your commission agreement to understand your rights and obligations regarding commission payments.
Document Everything: Keep detailed records of your sales, commissions earned, and any communication with your employer regarding commission payments.
Communicate Clearly: If you have concerns about commission payments or changes to your commission structure, communicate with your employer in writing to ensure that there is a record of your discussions.
Seek Legal Advice: If you believe that your employer is withholding or reducing commission payments unlawfully, seek guidance from an experienced employment attorney who can help you understand your legal options and advocate for your rights.
How an Attorney Can Assist You with Commission Disputes
An attorney can play a crucial role in helping you navigate the complexities of commission disputes with your employer. Here are several ways in which an attorney can assist you in this case:
Reviewing Contracts and Agreements: Your attorney will carefully examine your employment contract and commission agreement to assess your rights and entitlements regarding commission payments.
Assessing Your Rights: With a deep understanding of California’s labor laws, your attorney can determine whether your employer’s actions regarding commission payments comply with legal requirements.
Negotiation Support: Your attorney can represent you in negotiations with your employer, advocating for your interests and working to secure the commission payments you rightfully deserve.
Filing Complaints: If negotiations fail, your attorney can assist you in filing a formal complaint with relevant government agencies, such as the California Division of Labor Standards Enforcement (DLSE), to address unpaid commissions.
Litigation Representation: In cases where legal action is necessary, your attorney can represent you in court, filing lawsuits against your employer and pursuing compensation for unpaid commissions and any related damages.
Protecting Your Rights: Above all, your attorney is dedicated to protecting your rights and ensuring that you receive fair treatment under the law. They’ll empower you to make informed decisions about your case.
Unlock Your Commission Rights Today with BLG
In conclusion, while employers generally have the discretion to adjust commission payments under certain circumstances, they must do so in compliance with California law and any applicable employment contracts or agreements. Employees have legal rights and protections regarding commission payments, and they should be vigilant in asserting those rights to ensure fair treatment in the workplace. If you believe that your employer has unlawfully withheld or reduced commission payments, don’t hesitate to seek legal advice and take appropriate action to recover what you are rightfully owed.
Are you facing challenges with unpaid commissions? Don’t let your hard-earned income slip through the cracks. At BLG, we specialize in protecting employee rights and ensuring fair compensation. Our experienced team of employment attorneys is here to help you navigate California’s complex commission laws and fight for what you deserve.
Contact us today for a free consultation.
1-800-870-8910