The Law of Commission-Based Pay for Sales Employees | Mann & Elias

When to Seek Justice for Commission and Bonus Disputes

The Law of Commission-Based Pay for Sales Employees in CaliforniaCommissions are one of several ways an employee can get paid for their contributions to a company or business. In California, employees who earn a commission are legally protected and should get paid for their work, and in some cases over time. Each state has a particular way of honoring commissions. In this article, we explain the rights of employees that live and work in California, as the law surrounding commission disputes can be complex. If you have not received the payment owed to you, it may be time to retain a sales commission lawyer in Los Angeles.

How Does the Law Define Commission?

In California, a commission is a form of compensation that is paid to an employee for a sales-related service. Legally, employees who do not have a role in sales cannot earn commissions, even if it is based on a percentage of a customer’s payment. The amount a salesperson gets paid is based on the value of what was sold – or the commission itself. An employer bases your success on two key factors:

  • The percentage of sales made, or the profits received.
  • The total number of sales.

Because commissions are considered as a wage payment, you should expect to receive a paycheck from an employer. However, it is important to remember that commissions are not discretionary. This means your boss cannot choose to pay or withhold from you. For example, if you were next in line to get awarded with a performance bonus, it should not be offered in place of a commission payment.

California Law on Commission Agreements

Before you accept your role as a salesperson, you should understand the terms of your contract agreement, as it contains vital information about commissions. If most of your compensation is based on how many sales you make per quarter, the law requires that the agreement is in writing. It should detail how the commission will be calculated and paid. Your employer should give you a copy, which you will sign and return to bind your agreement. If you have any questions about the terms of the agreement, you can reach out to an employment attorney in LA for advice.

As you grow with the company, an employer can adjust the terms of your commission agreement and future employment. You may be wondering how this can impact your payment. If you completed your commission before signing the new contract, you have a right to get paid according to previous conditions. However, if the previous contract has expired, and you continue making sales, the new agreement will take into effect.

How is Commission Calculated?

There are a few ways earned commissions are calculated. Read on for a few examples:

A Price Percentage: When a commission is based on a percentage of the price a customer pays for a product or service.

Fixed Amounts Per Sale: There may be a flat rate payment listed in your commission agreement based on the number of products sold.

A Fixed-Floor: An agreement that is met when an employee makes a sale, like an incentive. The employer may provide a minimum payment for each product sold.

Mixed Agreements: There may be different percentages per total sales or the total number of sales.

Profit Percentages: A commission based on profit, which is intended to motivate the sales team to sell for the highest price possible.

The way commissions are earned vary per company, and employee. Whichever method is used to calculate your commission, you should make sure that it follows your agreement. If it isn’t, you can depend on a commission dispute attorney to advise you as to how you should move forward.

Can An Employer Deduct From Your Paycheck?

If you make a sale, you shouldn’t have to worry about seeing a deduction in your pay. According to California law, employers cannot make deductions from your pay unless they can prove:

  • The loss was caused due to dishonest or willful acts.
  • The loss was due to the employee’s negligence.

Unfortunately, this means employers can excuse their own mistakes by blaming an employee for an intentional act of negligence. If you were accused, you are allowed to hire an attorney for earned commissions in LA without fear of retaliation or wrongful termination. Your employer cannot unlawfully deduct from your pay for:

  • Cash shortages
  • Breakages
  • Lost equipment
  • Other losses that occurred from inattention to detail

The ruling on deductions is not always clear and straightforward. The following rule is not as clear and can be difficult to address to your Los Angeles work lawyer. Your commission can be reduced for costs related to the sale. An employer may charge you for shipping costs for the products you sold last month if they are associated with a direct sale or sales. As long as an employer is not deducting as a means for improving the business and provides you with a letter (in writing) stating why an adjustment has been made to your pay, chances are you won’t need to pursue legal action against them.

When to Take Legal Action for Unpaid Commissions

As a salesperson, understanding your rights at work is important especially when it comes to getting paid. You work hard to reach your sales goal. In return, your employer should fairly compensate you for your contributions to the company. When an employer violates the terms of your agreement, you should file a wage claim immediately through the State of California’s Division of Labor Standards Enforcement. Additionally, you can file a lawsuit to hold them accountable for other damages caused.

About Mann & Elias

The Law Offices of Mann & Elias is an employment law firm that provides guidance and legal support for individuals facing issues in the workplace. We represent clients at every level of the state and federal court systems in lawsuits regarding discrimination, wrongful termination, unpaid wages, and more. When your case is in our hands, we hope to minimize stress and concerns associated with work.

Workplace disputes and negotiations can be complicated and uncomfortable between an employee and employer. In many cases an employer can retaliate, causing individuals to feel that they are at a great disadvantage in the company. When you retain one of our lawyers, you will be well-protected and advised. While there are thousands of lawyers to choose from, we strongly believe our success is based on:

  • 50+ years of trial experience
  • Excellent advocacy skills
  • Intense preparation and research
  • Quality care

Since our partnership began over 20 years ago, we have settled hundreds of claims, completed 100 jury and bench trials, and recovered more than $18 million in settlements. In the end, our goal is to understand what you need and achieve the best outcome for you by focusing on those needs. For dedicated representation with no upfront fees, give us a call at 323-866-9564 or email info@mannelias.com.

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