Unpaid Commission in California: When It Is Earned and How to Demand It

Are commissions wages in California?

Yes. Labor Code section 200 defines wages as all amounts for labor performed, whether fixed by time, task, piece, commission basis or another method. Unpaid commissions therefore carry the same protections as an unpaid hourly paycheck, including final pay deadlines and the ban on taking back wages already paid.

The Labor Code describes commission wages as pay for services in selling the employer's property or services, based proportionately on the amount or value of what was sold (section 204.1). That definition matters: a flat bonus for hitting a team target may not be a commission at all, while a percentage of each sale is.

What must a California commission agreement say?

When pay involves commissions for work in California, the contract must be in writing and must set out how commissions are computed and paid (Labor Code section 2751(a)). The employer must give you a signed copy and get a signed receipt from you.

• Expired plans keep working. If a plan expires and everyone keeps working under it, its terms are presumed to continue until it is replaced or employment ends (section 2751(b)).
• What does not count. For this section, commissions do not include short-term productivity bonuses like those paid to retail clerks, temporary incentives that only increase pay, or bonus and profit-sharing plans unless the employer offered a fixed percentage of sales or profits (section 2751(c)).
• Read the definitions. Look for when a commission is earned, what happens to deals that close after you leave, how returns or cancellations are handled, and whether the employer can change the plan mid-year.

If you never received a signed plan, say so in your letter and ask for a copy. Labor Code section 432 also entitles you to a copy of any document you signed relating to your employment.

Earned, advanced or charged back: which is your commission?

The written plan sets the point at which a commission is earned. Some plans say a commission is earned when the contract is signed, others when the customer is invoiced or pays. Until the conditions in the plan are met, money paid to you may be an advance rather than an earned wage.

Labor Code section 221 makes it unlawful for an employer to collect or receive back any part of wages it already paid. Whether a chargeback crosses that line depends on whether the commission was actually earned under the plan, which is a question an employment lawyer can assess against your documents. If the dispute turns on the plan as a contract, the guide to a breach of contract demand letter explains that side.

Do you get commissions after you quit or are fired in California?

Yes, for commissions earned by your last day. The Labor Commissioner says the employer must complete the calculations and pay them on the date of termination if you are fired, or if you quit with at least 72 hours' notice; without notice, they are due within 72 hours. The employer cannot wait for the next commission cycle.

If a commission depends on something that has not happened yet, such as the customer paying, it becomes due once that condition is met. A plan that says you forfeit all commissions on deals that close the day after you leave deserves a careful read, since the outcome depends on what work the plan required and when.

If an employer willfully misses the final pay deadline, Labor Code section 203 makes it pay a day's wages for each day of delay, capped at 30 days. The calculator below estimates that figure from a daily rate. For a commission-paid worker, working out the daily rate can involve averaging earnings, so treat the result as a starting estimate.

Example: adding up a commission claim

Example (hypothetical): a medical device sales representative's plan pays 8 percent of contract value once the customer's first invoice is paid. She gives two weeks' notice and leaves on May 30. Two of her deals were paid before she left; one was paid on June 18.

If none of the $7,600 had been paid by July 1, her letter would list each deal, the plan's trigger, the date it was met and the amount. It could also note that waiting time penalties may apply to the amounts due on May 30.

How to write an unpaid commission demand letter

1. Get the written plan you worked under, plus any amendments and your signed receipt. If you do not have them, request them.
2. Make a deal list: customer, contract value, close date, invoice and payment dates, rate and commission owed.
3. Mark which commissions were earned before your last day and which became due later.
4. Cite Labor Code sections 200 and 2751, and section 203 if you have left and payment was late.
5. Ask for the exact total and a commission statement showing how the employer calculated it.
6. Give a firm, reasonable response date and keep proof of delivery.

The Labor Commissioner's wage claim page lists four years to file a claim based on a written contract and two years for an oral promise to pay more than minimum wage, so whether your plan was in writing can affect your deadline. For the final paycheck rules that apply alongside commissions, see the guide to the California final paycheck demand letter.

When an attorney-written commission letter makes sense

Under California law, the written plan decides when a commission is earned, so a commission letter starts with its wording. When the employer leans on a forfeiture or chargeback clause, rewrote the plan mid-year, owes a large sum, or faces a waiting time penalty you want stated accurately, the letter has to read the plan against the Labor Code. A clear plan and a short deal list may be enough for a letter you write yourself.

With Talk to My Lawyer, a licensed California attorney writes your letter from your commission plan, deal records and pay history and sends it on your behalf. Choosing a wage claim over a lawsuit, or the reverse, is a call to make with a lawyer who has gone through your specific plan and deals.