Unpaid Commission: Can it Be Recovered?

Most feel they have a solid understanding of overtime pay and whether or not they are receiving what they deserve, but when it comes to commissions, there seems to be additional confusion. What is unpaid commission and when is an employee able to recover unpaid commission?

What is Unpaid Commission?

Before we can define unpaid commission, it’s important to define commission wages in general. Commission wages are common in many industries, but prevalent in the computer and technology industries particularly. According to California wage law, commission wages refers to compensation that is paid as a percentage of the price of the product or service that is being sold. Commissions can also be based on the number of items sold. Disputes regarding commission wages and unpaid commissions are often resolved under the same legal principles as bonuses.

When are commissions “unpaid?” The easy answer is that commissions are classified as unpaid when they have been earned and never received. Technically the commission is earned by the employee who “procures cause” for the sale or other event resulting in commission pay. Disputes often arise when management intervenes during the sales process. When management is involved at some point during a sale, it is important to note the point at which someone procures cause for the sale and who was handling the customer at that point in time. This is the individual who has technically earned the agreed upon commission.

Obtaining Unpaid Commission:

If you feel you are entitled to commission that you never received, seek legal counsel. Employers frequently change compensation plans, utilize unfair provisions and/or adopt a very narrow interpretation of a commission agreement or plan. In some cases, employers are forced to seek unpaid commission post-employment. It’s important to note that employees who no longer work for a company can still be due commission on sales procured during their employment. Employers can’t reap the benefit of your efforts while simultaneously ignoring the agreement to provide you with a commission for those same efforts.

Employers will often work their compensation plans in various ways in order to justify commission forfeiture with little to no cause. Examples include employers who add verbiage making commission payment “exclusive” to current employees or allowing the employer to alter the commission agreement in certain situations, etc. California wage laws can help former and current employees recover commissions. The courts may see the commission agreement differently than your employer.

Call Blumenthal, Nordrehaug & Bhowmik today and find out how your unique circumstances can be taken into consideration when attempting to obtain unpaid commissions.