Many California employers provide payment to their workers by commission. A commission is a payment the worker earns by completing a particular job or task.
How Do California Workers Earn Commission?
One common example of a commission-based payment system is receiving a specified payment (or commission) upon completion of a sale. Many California employers offer their employees sales commissions. A sales commission often equates to a percentage of the total sale or the contract the salesperson brings to the company. Commission payment is frequently used as an incentive to increase productivity for employees engaging in "selling" for California employers. Some California employers may even provide 100% of their payment to sales staff based on commission. In other cases, sales reps may receive a salary with additional bonuses and commissions earned by completing specific tasks.
In California, Commission is Legally Defined as a Form of Wages:
In California( and many other states), a commission is defined as a form of wages. According to California employment law, bonuses and commissions received from an employer are considered an earned wage. California employment law states that employers may not (generally speaking) withhold or deduct wages an employee already earned. While a few situations allow an employer to deduct a commission, these specific situations are limited by California state law and must also be specifically outlined in the commission agreement.
Can a California Employer Withhold Commissions or Bonuses?
Since commissions are considered wages under California law, an employer can withhold or deduct an employee's earned commission is limited. However, specific situations may allow an employer to reduce the amount of a paid commission if the potential is included in the original commission agreement. For example, a California employer may deduct commissions (when included in the commission agreement): when products are sold at a discounted price, when products sold are later returned, when the payment for the product or service is refunded to the customer, if the employee's deliberate, dishonest, or negligent actions cause damage, if there is a wage garnishment or payroll tax deduction in place, etc.
Can an Employer Change the Rate of their California Employee's Commission?
Generally speaking, a California employer may lower a worker's commission rate, but they must notify their employee of the rate change. In addition, any reduction in commission rate must only apply to future commissions (the rate change is not retroactive and should not affect commissions the worker already earned).
If you are a California employee and have unpaid commissions or bonuses, get in touch with Moss Bollinger, Sherman Oaks, California employment law attorney. He's dedicated to protecting and asserting the rights of his clients. Call 866-942-7974 today for a free consultation or contact us online.