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Employees can be rewarded for their work in many ways. Hourly wages and fixed salaries are the most common examples. Some employees have a
How Much Commission Do Furniture Salesman Make
All California employees, including those earning commissions, have the right to be compensated for their work. They also have the right to pay on time. In some cases, they have the right to pay overtime.
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This article explains the rights of salaried employees on a commission basis in California. Because every situation is different and the law is complex, employees should seek the advice of an employment attorney if they believe a commission was improperly paid.
In California, a commission is a form of compensation paid to an individual for sales-related services they provide. In a commission-based arrangement, the size of the employee’s compensation depends on the amount or value of the property sold.1
A payment that an employer may elect to pay or withhold, such as a performance bonus, is not a commission, even if calculated as a percentage of sales or profits.3
Can refer to the quantity of goods or services sold regardless of the price or value of the item sold.5 Term
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A car seller is paid a flat rate for each vehicle sold. His salary is a commission because it is determined by the quantity of goods sold.7
A grocery store employee earns reward points for each shopping cart they bring back to the store. Reward points do not directly reflect the price or amount of goods or services sold. Worker’s compensation
A product or service.8 Non-sales employees do not earn commissions, even if their compensation is based on a percentage of a customer’s payment or the amount of an employee’s production.9
An employee engages in sales when he engages in the exchange of a product or service for money or something else of value. Definition of
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Also includes sales-related activities, such as when an employee tries to influence customers or clients to buy a product or service.10
A mechanic is paid a percentage of the hourly rate paid by the customer to the mechanic’s employer. This is it
An employee-placement service pays a percentage of the placement fee the employer receives when job candidates hire clients. This arrangement meets the definition of “selling” because it is a “sales-related activity” that induces a client to hire candidates.
The conditions under which commissions are earned are established by agreement between the employer and the employee. That contract is often part of a broader employment contract.13
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If some or all of the compensation of California employees is based on commissions, California law requires that the compensation agreement be in writing.14 The contract must specify the manner in which commissions are calculated and paid.15
A copy of the written commission agreement must be provided to the employee. The employer must require the employee to sign a receipt as proof that a copy of the agreement has been given to the employee.16
But once a commission has been earned under the existing contract, the employee has the right to pay the earned commission. This is true regardless of how a new contract deals with commissions not yet earned by the employee.18
When a commission contract expires and the employee continues to make sales, the contract is deemed to remain in effect. In other words, the employer must continue to pay the commissions provided for in the contract until a new contract is made or employment is terminated.19
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[T]here is a fundamental and substantial public policy protecting an employee’s wages in this state…. Phillips v. Gemini Moving Specialist (1998) 63 Cal.App.4th 563, 574The conditions that must occur before a commission is “earned” are defined by the terms of the commission agreement. 22 Once those conditions are met, the commission is treated as wages and the employer legally pays it as such. They will pay any other wages.23
For example, a contract may provide that a commission is earned when a customer executes a sales contract to purchase goods or services.
A salesperson’s duties, in particular, include following up with the customer to ensure payment for goods sold.24
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Specify when and how a commission is earned. Earned commissions must be paid within the time required by California law.25
As noted above, the manner in which a commission is “earned” is defined by the commission agreement.26 If the employee performs all the activities required to “earn” the commission under the contract, they are generally entitled to receive it.
However, conflicts arise when the employee quits or terminates employment before their right to receive commission is fully vested. Generally, termination does
Interfere with the employee’s right to receive a commission that does not require any other action on the part of the employee to complete the sale leading to the payment of the commission.27
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However, some contracts state that the employee must be currently employed by the employer in order to receive the commission. It is sometimes called A
Forfeiture provisions can have a very unfair effect on commissioned personnel. In essence, an employee can do all the work required to earn a commission, however they lose their right to commission if they retire or are fired.
There is currently a division of powers over whether forfeiture clauses in commission contracts are legal. 29 Unfortunately, most California court cases involve commission contracts.
Make a payment of commission contingent upon future events such as the employee’s continued employment with the company.30
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But at least one court has suggested that forfeiture clauses in commission agreements are sometimes unconscionable and therefore unenforceable. 31 There is therefore at least some hope that future case law or legislation will recognize the grossly unfair effect that such agreements may have.
Now, employees considering signing a commission agreement should read the language carefully to determine what steps must be taken to fully earn their commission. If the contract includes a forfeiture clause, it is worth negotiating with the employer to remove the clause.
As can be seen, a salesperson can earn different commissions depending on the product being sold or the geographic area in which the sale is made.
California law prohibits employers from deducting from employees’ wages most expenses incurred during regular business hours.34 In most cases, employers may not deduct business loss wages from wages unless the employer can establish one of two things. :
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This strong law means that employers in California must usually bear their own damages for mistakes that result from the simple negligence of their employees. Employers
Make deductions from their employees’ salaries for cash shortages, breakdowns, loss of equipment or other business losses.
An employer can make deductions for things like shipping, the cost of the product sold, or the cost of free products offered by the seller to induce sales—but only if those costs are directly connected to the same sale.
, however, make deductions only for things remotely related to the sale.38 Nor can an employer use deductions as a means of shifting the cost of doing business to the employee. Cost of electricity of the business or general overhead of the business from the employee’s commission.
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At least one court in California has held that an employee’s commission may not deduct the cost of credit card fees or the employee’s use of a company telephone. The court held that such fines only serve to shift the cost of doing the employer’s business to the employee.40
Although it remains to be seen whether other courts will adopt this interpretation, employers are careful to avoid shifting generalized business expenses to commissioned employees.
Finally, if an employer wishes to make deductions from an employee’s commissions, those deductions must be clearly documented in writing.41
In general, it is legal for a commission agreement to make a commission contingent on events occurring after a sale. This means that a commission agreement may require an employee to repay commission for returned goods. 42 Similarly, if the sale is reversed for some reason, the contract may require that any wages advanced to the employee be deducted at a later date (like a bounced check, say).43
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However, a commission agreement does not allow deductions from an employee’s commissions for merchandise returns not directly attributable to the employee. Therefore, unless the employer can specifically identify the sale as being from a particular employee, the employer should not make deductions for income from that sale.44
Some commission agreements require the employer to make an advance to a salesperson toward commission wages that have not yet been fully earned. For example, a commission agreement may provide for a commission
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