In California, where I practice law, I often represent employees seeking their commission wages. In these cases, the employer doesn’t want to pay commissions usually because the employee is no longer employed at the company or they feel that someone else (often a management employee) deserves the commission. Sometimes, it comes out that the employer feels that the commission is just too much for someone employed as a salesperson. This certainly is frustrating for my clients, but luckily they have legal avenues to pursue as discussed below. This guide illustrates the issues in these situations under California law, but it is neither a comprehensive guide on the subject nor a replacement for speaking to a qualified lawyer about your case.
Under California law, a commission is money an employee earns from the sale of a product or service. It is based on the percentage the sales price or on the number of units sold.
When a commission dispute arises, the first thing to do is to take a hard look at the agreement with the employer. Under California law, the employee’s right to commissions depends on this agreement. Obviously, it’s best to get this agreement in writing, but an oral agreement, if proved, is just as effective in court. These agreements are binding contracts.
The commission contract often determines disputes on whether the employee earned the commission. If the employee did what he or she was supposed to do under the contract, then the employee should recover the promised commission. In California case law, this is expressed as “he who shakes the tree should be allowed to gather the fruit." Under this principle, it does not matter that someone else contributed to the sale or gave the employee the sale’s lead. If the employee fulfilled the conditions of the contract, the commission should be paid.
Employers often put in their compensation plans and commission agreements that only current employees will receive commissions. In other words, commissions will only be paid to people presently on the company payroll. But even in these situations, the former employees still may be able to recover commissions. The resolution depends on what was done – and what remained to be completed – on the sale. Generally, the courts will look to see if the employee adequately "shook the tree."
California law provides that if an employee wins a lawsuit for commissions, in addition to the amounts they are owed, the employee can receive an award of reasonable attorney’s fees and costs. Sometimes, they can even receive a penalty equal to 30-day's wages.
In sum, even after the employer says “no," employees should not give up on receiving their commissions. In these disputes, the employee should consult an attorney who specializes in these cases.
Matthew A. Kaufman
Harris & Kaufman
15260 Ventura Boulevard, Suite 2250
Sherman Oaks, CA 91403