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Employees Working on Commission

Commissioned employees are usually selling goods or services for their employer. Common industries include but are not limited to real estate sales, sale of marketing services, cosmetics sales, insurance sales, computer and software sales, sale of stocks and other instruments of finance, sale of automobile parts and accessories, industrial equipment, e.g. tractors, pavers, bulldozers, alcohol sales, among other tangible goods or professional services. Call centers are likely locations where commissioned employees work.

California Labor Code Section 2751 lays the groundwork for employees working on a commission basis. First, any person working on commission is entitled to have their commission agreement set forth in writing. The writing must set forth the manner in which commissions are to be paid and computed.

Second, California Labor Code Section 2751 requires the employer to give every employee who is a party to the commission agreement a signed copy of the written agreement. The employer is also required to obtain a signed receipt for the agreement from each employee who receives a copy of the agreement.

At Spencer Young Law in Oakland we have reviewed these agreements from employers throughout the Bay Area.

Commissions are defined as follows pursuant to California Labor Code Section 204.1: “compensation paid to any person for services rendered in the sale” of an “employer’s property or services and based proportionately upon the amount or value thereof.”

Commissions are specifically NOT the following:

  1. Short-term productivity bonuses, for example, a bonus paid to a retail clerk for holiday sales.
  2. Temporary, variable incentive payments that increase, but which do not decrease, payment under the written commission agreement.
  3. Bonus and profit-sharing plans, unless the bonus or profit- sharing plan relates to an offer by the employer to pay a fixed percent of sales or profits as compensation to the employee for work to be performed.

Many employee work hard to earn their commissions but end up never receiving the money they earned. One of the most common types of complaints we hear from employees is that they either do not understand their commission agreement, or they disagree with the pay-out calculation by their employer under a commission agreement. It is important to note a basic rule in contract law when dealing with commission agreements: disputes about unclear contracts generally get resolved against the person who wrote an unclear contract. Therefore, if your commission agreement is unclear, and you reasonably believed you should have made “X amount” in commissions, but your employer says, “No, you get Y amount”, it is possible that you could win a contract dispute claim given that the contract your employer wrote is ambiguous. Contact Oakland based Spencer Young Law where a contract attorney can help you make sense of your commission agreement.

In some situations, an employer may flatly refuse to pay an employee their earned commission. This sometimes happens due to a dispute over the calculation. Other times an employer may simply not have enough cash on hand to pay out all of their commissioned employees. Either way, you are entitled to receive compensation for what you have earned.

What do you have to prove? There are two vital elements to prove: 1) That you have a commission agreement, and 2) that you actually earned your commission. Documentation about these elements in the form of letters, e-mails, text messages, voice mail records, and even video recordings may help resolve your dispute.

What are you entitled to? You may be entitled to the following compensation for failure to pay earned commissions: 1) your total commissions earned, 2) possible liquidated (or double) damages for failure to pay, 3) additional damages if you can show your employer failed to pay you for a discriminatory or retaliatory reason, 4) waiting time penalties for failure to pay if you resigned or were terminated and didn’t receive your final check, 5) penalties for inaccurate wage statements, and 6) attorney’s fees and costs for having to hire an attorney and file a lawsuit to collect your money. The legal team at Spencer Young Law can help you recover these wages and penalties from your employer.

It is important to have a qualified employment attorney review your commission agreement and commission pay if you have doubts about the way payment is being calculated or paid. Call Spencer Young Law for a free consultation with an Oakland commissioned employee lawyer. We like to suggest that you give your agreement the “smell test”. If you are working on commission, you likely have experience reading the contracts, and experience calculating what you are owed. If you think something “smells off”, it probably is. Trust yourself and then trust us to make things right.

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