When you get a job, you deserve to be paid for your work. Not only do you deserve fair pay, but you should be paid according to what your contract stipulates. Many workers are paid on commission in this state. Unfortunately, many employers do not honor the agreed-upon commissions. At the Azadian Law Group, PC, our qualified and experienced team is here to help if you have been unfairly paid. Let our Los Angeles failure to pay commissions attorney help you today.
There are a number of legal claims the Los Angeles Failure to Pay Commissions Attorney at Azadian Law Group have asserted against employers related to unpaid commission. These claims include:
The most important starting point in determining if your employer owes you commission is the commission agreement. As stated by the Court in Koehl v. Verio, Inc., 142 Cal.App.4th 1313, 1335 (2006), “A commission is ‘earned’ when the employee has perfected the right to payment; that is, when all of the legal conditions precedent have been met. Such conditions precedent are a matter of contract between the employer and employee, subject to various limitations imposed by common law or statute.”
In California the Labor Code requires that employers provide employees with a written commission agreement. Labor Code § 2751.
These agreements can be in the form of a compensation plan, sales plan, commission plan, or similar document. A careful legal analysis of the commission agreement is required to determine if the employer violated the terms of the commission agreement.
What about a verbal agreement related to incentive compensation or bonuses?
In certain circumstances, it is possible for even a verbal commission agreement to be enforced. For example, the California Court of Appeal found a verbal agreement to be sufficiently certain and definite where an employer told three employees that if they “stayed and continued to work for West Coast until the company sold, defendants would give plaintiffs bonuses that would be sufficient for plaintiffs to retire.” Moncada v. W. Coast Quartz Corp., 221 Cal. App. 4th 768, 777-778 (2013).
Citing longstanding precedent the Court found: “In considering expressions of agreement, the court must not hold the parties to some impossible, or ideal, or unusual standard. It must take language as it is and people as they are. All agreements have some degree of indefiniteness and some degree of uncertainty.” The Court emphasized that “the law leans against the destruction of contracts because of uncertainty and favors an interpretation which will carry into effect the reasonable intention of the parties if it can be ascertained.” The Court also rejected the employer’s argument that the verbal agreement was too speculative based on the “unspecified amount and subject to different interpretations.” In doing so, the Court relied on Sabatini v. Hensley, 161 Cal. App. 2d 172, 177 (1958), which affirmed a jury verdict awarding an unpaid bonus to an employee. Although the employer argued the offer of the bonus was unenforceable because the amount was not fixed, and there was no formula to set the amount agreed upon by the parties, the court held: “The failure to specify the amount or a formula for determining the amount of the bonus does not render the agreement too indefinite for enforcement. It is not essential that the contract specify the amount of the consideration or the means of ascertaining it.” The Court reasoned that even though an amount sufficient to retire was not a clear calculation the amount could be determined “using information about the Plaintiffs’ debts and obligations, their lifestyles at that time and actuarial information sufficient to allow financial planners to set a specific amount for each of them given their specific circumstances at that time.” The Court held that “[t]he promise was clear and definite: continue working at West Coast until the company is sold, and at that time, we will pay you a bonus that will enable you to retire.”
The implied covenant of good faith and fair dealing “prevent[s] one contracting party from unfairly frustrating the other party’s right to receive the benefits of the agreement actually made.” Guz v. Bechtel Nat. Inc., 24 Cal. 4th 317, 349 (2000). In the context of unpaid commission, this can occur when an employer acts in bad faith in preventing the employee to fully earn the commission. For example, an employer cannot fire an employee simply to prevent the employee from completing a final task needed to formally earn the commission.
A legal claim for “substantial performance” means that there has been no willful departure from the terms of the contract, no omission of any of its essential parts, and the employee has in good faith performed all of its substantive terms. This means that if the employee did everything to earn the commission but there was some trivial defect or imperfection, the employer cannot use that trivial issue to avoid paying the employee’s commission or incentive compensation.
In California, commissions and other forms of incentive compensation are considered “wages.” Davis v. Farmers Ins. Exchange, 245 Cal. App.4th 1302, 1332, fn. 20 (2016) (“wages include not just salaries earned hourly, but also … commissions.”). Therefore, failure to pay earned commissions or incentive compensation also constituted a labor code violation for failure to pay wages. Labor Code §§ 204, 210. Where an employee resigns or is terminated, all wages that are not paid also subject the employer to a penalty of up to 30 days of additional compensation. Labor Code § 203.
There are numerous other potential labor code claims to be explored by a skilled employment attorney at Azadian Law Group as part of the free consultation. These other claims can be very valuable and include failure to include all forms of compensation in calculating the employee’s overtime rate of pay, meal period penalties, rest period penalties, and penalties for inaccurate wage statements.
Commissions are a type of wage that is based on a percentage of a payment an employer receives for products and/or services the employee sells. There are various ways that commissions work.
Regardless of how a worker is paid, commissions must be received at the rate agreed upon by the employer and employee when they are hired. When a commission is involved in any type of a California worker’s pay, the employee must specify this in a written agreement with the employee. This agreement must discuss specifically how the commission will be calculated.
This agreement should be as specific as possible and include the time when the employee received the commission:
If you do not have a written agreement, but rather a verbal agreement, with your employer about commissions, you should consult an attorney. If your commission agreement is unclear, an attorney can give invaluable advice that can protect your earnings.
The law in California prohibits an employer from retaliating against an employee for asking for their earned commissions as agreed upon. It is also usually unlawful for an employer to terminate or retaliate against an employee to avoid paying a commission.
When commissions are earned by a worker in California, they must be paid on the same schedule as other wages (in California, most employees must be paid at least two times a month).
If you or someone you care about has not been paid the commission they deserve from an employer, you need to secure legal assistance today. At the Azadian Law Group, PC, our employment lawyers believe in standing up for workers’ rights. We will work to secure the compensation you deserve, including: