Commissioned Sales Employees in California
California law strictly regulates the payment of commissions to employees who work in sales to ensure that employees receive fair compensation for their sales efforts. Below is a general overview of issues our firm tackles in litigation on behalf of commissioned California sales employees:
Written Commission Agreements: California law mandates that employers must have written commission agreements with their sales employees. These agreements should outline the terms and conditions of the commission structure, including the method of calculation, when commissions are earned, and how they are paid.
Earned Commissions: Commissions are generally considered earned when the employee has met the conditions outlined in the commission agreement. These conditions often include making a sale, delivering a product, or receiving payment from the customer.
Timely Payment: Employers are required to pay earned commissions promptly and according to the terms specified in the commission agreement. Commissions must be paid in regular pay periods, either on a biweekly or semimonthly basis. Advances may be made where customer revenue may not yet have been collected, in order to satisfy California’s requirement that each pay period include the minimum commission payments required under California law.
Termination of Employment: When an employee in sales is terminated or resigns, California law stipulates that earned and unpaid commissions must be paid immediately, or in the case of resignation, 72 hours later. If a condition precedent to payment exists (such as payment receipt of customer payment) the employer must pay immediately upon completion of that condition.
Commission Disputes: Commissions are wages in California, and all of the rights and protections for payment of wages apply to them. If there are disputes or discrepancies regarding commission payments, employees have the right to pursue legal action to recover unpaid commissions in the same manner as wages.
Record-Keeping: Employers are required to keep records related to commission agreements and payments for at least three years, and these records must be made available to employees upon request.
Public Policy Exceptions: Employers cannot use commission agreements to evade minimum wage and overtime requirements; nor can they fire employees who earned a large commission, but before their payday was due, in order to avoid paying the employee what they are owed.
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