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Your guide to unpaid commissions
EDNA Team • Sep 09, 2021
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Your guide to unpaid commissions
You’ve put in the hours. You’ve made the phone calls, met for lunch, and replied to emails at 2 am. And finally, the prospect you’ve been chasing gives in. You’ve won them over, and you’ve closed the deal. Not only have you smashed your sales quota, but you’ve also earned yourself a pretty sum in the form of a commission.
But what happens when your employer refuses to pay?
Well, under the law, they cannot do that. Unpaid commissions are unpaid wages, and you have a legal right to the commission you earned following a sale. Your employer cannot refuse to pay you, negotiate the amount paid, or pay you later. If you locked down the sale while employed, you earned the commission.
Here’s what you need to know about commission agreements, unpaid commissions, and how to protect yourself.
What is a commission agreement?
A commission agreement, also known as a commission plan, outlines how employers calculate and pay employees’ commission payments. For example, your commission agreement might state that you are owed a 5-percent commission following a sale. This amount might be tacked on to your regular paycheck or deposited the next business day.
So, which parts of your commission agreement should you pay close attention to? How your commissions will be calculated is a big one. According to the California Division of Labor Standards Enforcement
, a commission cannot be earned by you, the employee, before your employer can reasonably calculate it. Your employer can’t calculate the commission on the sale of a house, for example, before you sell it. What’s more, your employer doesn’t have to pay your commission before it’s earned – this is a particularly important point to keep in mind if you quit or are let go.
Unlike overtime wages, there is no one-size-fits-all rule or formula that dictates how commissions are calculated. However, it must be a percentage of the price of the sold product or service. It’s up to the employer and employee to reach a commission agreement and put that agreement in writing.
Ambiguous commission agreements with room for interpretation can spell disaster if your employer decides not to pay you the amount you believe you’ve earned.
What should a commission agreement include?
A commission agreement should include a detailed description of how your commission wages will be calculated and paid. In some circumstances, your employer will outline any deductions they plan to take from your earned commission. It should also say when the commission becomes yours. Normally, this is when you have done everything necessary to finalize the deal, such as getting a signed sales contract. However, in some cases, it might be when the client makes payment.
When it comes to commission agreements, the easier to understand, the better. After reading your agreement, you should have a crystal-clear idea of what and when will be paid.
Your commission agreement might also include an expiration date.
Are commissions considered wages?
Yes. According to California law, an earned commission is a form of wage. Therefore, your boss cannot refuse to pay you the commission you earned under the terms of your commission agreement. And if they do, you can seek trusted legal advice and bring your claim to the Labor Commissioner if necessary.
In some cases, you also have the legal right to file a lawsuit against your employer. Get in touch with the Employee Law Group to chat through your options and get tailored professional advice.
Am I owed commission on sales I contributed to after my employment ended?
Yes. If you were the leading cause of a sale, you should be paid your commission for that sale – even if you no longer work for the company. Or, as the court so eloquently put it in the case of Willison v Turner Resilient Floors, “He who shakes the tree is the one to gather the fruit.”
Even if your commission agreement goes against this rule, it’s still illegal for your boss to deny you your commission if you’re not employed. Of course, they might claim you had next to no input on the sale or that it was as good as done, but don’t let that put you off. With expert guidance, you can fight for the payment you deserve.
How to protect yourself against unpaid commission?
There’s nothing worse than working hard for a big sale only to face your boss’s refusal to pay. By following the tips below, you can protect yourself against unpaid commissions.
- Read your commission agreement carefully before signing your employment contract. For total peace of mind, have an employment attorney to review it, too. Make sure you understand how your commission will be calculated, when it is earned, and when it will be paid. If any part of your commission agreement is unclear or ambiguous, raise your concerns with the employer.
- Recognize that failing to provide a commission agreement is a huge red flag. Your employer must give you your commission agreement in writing – failing to do so is illegal.
- Keep records of the sales you closed. Take note of the date you made the sale, the amount, and the commission you earned. Use this log to keep an eye on your payments. Are they the correct amount? Are you being paid on time?
- If you believe you aren’t being paid the commission you are rightfully entitled to, start tracking the type and amount of work you did to close each sale. Include any other relevant details, such as the scope or importance of the sale.
- Make contacting your employer the first step. Sometimes, unpaid commissions are the result of a misunderstanding or mistake. Give your boss the benefit of the doubt.
- Remain cordial and professional during all written and spoken communication with your boss. If you wouldn’t want it read aloud in court, don’t say it.
Claiming unpaid commission
If your employer wrongfully withholds the commission you earned through hard work and perseverance, it’s natural to feel angry, hopeless, and frustrated. Don’t let them get away with it – you are owed your commission pay as much as your regular wages.
Let’s fight for your rights. The team at Employee Law Group has years of hands-on experience helping clients just like you win the compensation they deserve. We have a deep understanding of the nuances of employment law, which means we can respond creatively to whatever is thrown your way.
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