Unpaid Commissions in California: When the Commission Is Earned

Earned versus payable

Nearly every commission fight reduces to one question: what event makes the commission earned? Signature of the contract, shipment, invoicing, or collection of payment are all defensible triggers, and the plan controls — but only if it says so clearly. Ambiguity is construed against the drafter, which is the employer.

Once earned, the commission is a wage. A clause forfeiting earned commissions because the salesperson left before payday is generally unenforceable. A clause stating the commission is not earned until collection, applied consistently, usually is.

Clauses to examine closely

• Definition of the earning event and the payment schedule.
• Chargebacks for refunds, cancellations, or nonpayment, which may be lawful when tied to a properly defined earning event but not when they operate as deductions from earned wages.
• Draws against commission — a recoverable draw can be lawful, but recovering it from earned wages or below minimum wage is not.
• Post-termination treatment, including trailing commissions on deals in progress.
• Unilateral modification rights, which can apply prospectively but not to commissions already earned.
• Quota, split, and house-account provisions that reassign credit late in a deal cycle.

What is recoverable

• The unpaid commissions themselves.
• Waiting time penalties of up to 30 days of wages when earned commissions are not paid at separation.
• Wage statement penalties where commissions were reported incorrectly.
• Interest and attorney fees.
• Overtime consequences where commissions were excluded from the regular rate for non-exempt sales staff.

For employers: writing a plan that holds up

State the earning event precisely, describe chargebacks in the same section so they are part of the earning definition rather than a deduction, address post-termination treatment explicitly, and get a signature with a copy provided to the employee as the statute requires.

Then apply the plan consistently. Selective enforcement is what turns a defensible plan into evidence.

Recovering unpaid commissions

Modest claims can go to the Labor Commissioner; larger ones, and claims joined with retaliation or wrongful termination, belong in court. Rainey Law P.C. handles commission disputes for both sales professionals and companies across San Diego County.