As an employee in California, you may be expecting to earn commissions on some of your endeavors based on a formal or informal understanding with your employer. For example, you may expect to receive 10% of the price for everything that you sell as a salesperson.
However, a situation often arises which befuddles employees – can your employer unilaterally change your commission structure or the manner in which you would be entitled to commissions? Using our above example, can an employer decide that you will no longer get 10%, but rather 5% for every sale you make as a salesperson?
The answer may surprise you. Generally, your employer can change the way you are paid commissions. However, there are several important limitations to this rule.
Most importantly, employers can typically only change your compensation structure for commissions that have not yet been earned. Employers generally cannot retroactively change your entitlement to commissions for work that was already performed by you or for commissions that were already earned by you. In such instances, you should be paid all commissions already owed to you, and any retaliation by your employer against you for demanding that you be paid past-due amounts may constitute illegal retaliation under California law.
Another important limitation is based on whether there is an existing written contract between you and the employer. At times, a written contract may limit one side or both sides’ ability to unilaterally change a commission structure. A contract may also specify the manner in which you earn commissions and would be paid for your work. While it is permissible for an employer to ask that you sign a new contract setting forth the terms of a modified commission agreement, any commissions earned under your prior agreement should be paid out in accordance with your prior agreement.
Lastly, and perhaps more importantly, employers are generally not permitted to terminate or otherwise retaliate against their employees for questioning whether they are being paid correctly or whether they are owed commissions. Such actions by the employer may violate California’s labor laws and entitle you to lost wages and emotional distress, among other remedies, for being wrongfully terminated.
Whether you are entitled to commissions and whether you were retaliated against are highly fact-based inquiries, with each situation varying. We encourage you to consult with an attorney if you believe your employer is not honoring your commission structure or is retaliating against you based on your efforts to be paid past-due sums. We offer free consultations and may be reached at (424) 235-4385 if you have further questions.