Claims for unpaid commissions form the heart of what we do at Strauss & Strauss, APC. That is because unpaid commissions wage claims are so common. These days, more and more employees are paid on a commission basis because employers realize that shifting costs to employees is a good way to increase profits. They often refuse to pay commissions, especially commissions that are large.
California law about commissions is kind of like the Wild West. Unlike the specific laws that require employers to pay overtime wages and set the formula for how to calculate overtime pay, there are no specific laws that set forth the amount of commissions to pay employees.
On the contrary, claims for unpaid commissions arise out of contract law. That means that whatever the parties agree on for the payment of commission wages will form the basis for any plans for nonpayment of those commission wages.
The problem with this approach is that oftentimes employers and employees do not put their commission agreement in writing, or the written contract is ambiguous and can have multiple meanings. The parties will therefore disagree on the terms of their agreement, and whether commissions have been earned or not. (However, a new law dictates that starting on January 1st, 2013, all commission agreements must be in writing, but since the statute of limitations may be as long as four years on claims for unpaid conditions, the new law will not resolve this issue quite yet.)
At Strauss & Strauss, APC, our clients have handled claims for unpaid commissions, both big and small. We are familiar with the process for bringing such claims before the courts of the State of California or how to file wage claims with the California Labor Commissioner. We also know that claims for unpaid commissions can trigger penalties for violation of Labor Code section 203, commonly referred to as waiting-time penalties. Perhaps most importantly, we know what else to look for when our clients come to us with claims for unpaid commissions. When an employer fails to pay commissions, it may trigger minimum wage violations and attendant liquidated damages claims. It may also say that the employer owes the employees overtime wages and has not provided the employee with adequate paycheck stubs.
For answers to frequently asked questions regarding claims for unpaid commissions, visit our wage claims FAQ section.
Unpaid Commissions Wage Claims
Unpaid commissions are a very common type of wage claim in California. Employees who earn commissions but are never paid for them may recover the commissions earned in a wage claim. However, California law distinguishes between the many types of commissions, and some “commissions” are not considered wages that can be recovered in a wage claim.
Contact a lawyer for help if you are interested in pursuing an unpaid commissions wage claim.
Commissions Are Wages
In California, commissions are “wages.” That means you can bring a wage claim in court or with the Labor Commissioner to collect unpaid commissions.
The term “commission wages” has been defined in the case of Keyes Motors, Inc. v. DLSE (1988) 197 Cal.App.3d 557; 242 Cal.Rptr. 873, which held that commissions arise from the sale of a product, not the making of a product or the rendering of a service. The court further held that in order to be a commission, the compensation must be a percentage of the price of the product or service which is sold.
What is Not Considered a Commission Wage
A plan which simply relies upon a “percentage” of some sum, such as the cost of the goods sold or the services rendered by an establishment, does not constitute a “commission wage;” the worker receiving the commission must be principally involved in selling the goods or the services upon which the commission is measured.
“Tech commissions” earned by auto mechanics and technicians are not considered commissions. Instead, auto mechanics and technicians must usually be paid an hourly rate.
Commission computation is based upon the contract between the employer and the employee. The commission may be based on either gross sales figures or net sales figures. As discussed below, certain criteria cannot be considered when reaching the “net” sales figures. If the element upon which the deduction from the gross sales is based is predicated upon a cost that is attributable to the employer’s cost of doing business, the element may not be used.
Payment of Commissions Upon Termination of Employment
A commission is “earned” when the employee has perfected the right to payment; that is, when all of the legal conditions precedent have been met. The provisions of any contract notwithstanding, California courts will not enforce unlawful or unconscionable terms and will construe any ambiguities against the person who wrote the contract (usually the employer) to avoid a forfeiture.
If you believe you have a claim for unpaid commissions, contact Strauss & Strauss, APC immediately. We will be able to assess your claim and, if we agree to represent you, we can present your claim in the appropriate venue. We look forward to speaking with you.
"Strauss & Strauss represented me in several cases against a former employer. They were taking on a Fortune 500 company that employed some of the world's biggest law firms. Michael Strauss and Andrew Ellison beat them every time."Stephen Craig
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