California law regarding commission wages is complicated, and many employers violate the law. Here are four examples:
California Labor Code section 2751 requires that commission plans be in writing and signed by both the employer and the employee. Many employers do not have written commission plans. If the commission plan is not in writing, the employee may be entitled to substantial damages and penalties.
Many employers place arbitrary conditions on when the employee "earns" commissions. Generally, commissions are “earned” when the employee successfully completes the last step in the sales process. Some employers claim that the commission is not earned until some future event occurs that is outside the employee’s control, such as the customer keeping the account open for at least 90 days. This may be illegal.
An employer can’t unreasonably delay the payment of commissions. Some employers hold commission checks for 60-90 days after the customer makes its payment. Absent unusual circumstances, the employer should pay commissions in the next regular payday after the customer’s payment.
Commission wages must be taken into account when calculating the employee’s overtime wages. Often, employers use only the employee’s base pay to calculate the employee’s overtime rate. This is illegal and may result in a substantial underpayment of overtime wages.
Clapp & Lauinger LLP has handled some of the most unique and difficult commission wage cases in the last 30 years. If you have a question about commission wages, please contact attorney Marita Lauinger at firstname.lastname@example.org.