California Employment Law: Commissions Owed to Employees After Termination
As discussed in Griswold Law’s previous article entitled, “California Employment Law: Unpaid Commissions for Sales Employees,” unpaid commissions are typically treated as unpaid wages under California law. However, commission structures can be complex and contingent on certain occurrences taking place before those commissions accrue and become due to the employee. The situation becomes even more difficult when those commissions become due after the employee has been terminated or has resigned.
In a recent California appellate court case, Randy Nein v. HostPro, Inc., et al., involving an employee attempting to collect commission wages allegedly owed to him after he was terminated, the court found that pursuant to the employee’s employment agreement, the employer rightfully withheld the commission payments because one condition of earning the commission was an explicit requirement that the employee be an employee of the company at the time the commission becomes due. The court honored the terms and conditions of the employment agreement in a straightforward fashion and ruled against the employee.
The lesson here, as with any other agreement entered into, is that contracts still mean something. Signing one’s name on the dotted line establishes certain benefits and obligations. As an employee (specifically an employee that earns commission wages), it is prudent to review your subject employment agreement and its commission structure terms and conditions–preferably before signing.
That being said, there are alternative factual scenarios that could potentially lead to different court rulings. For instance, under some circumstances, an employee could make the argument that the employment agreement was excessive and/or beyond reason and therefore “unconscionable.” If argued successfully, the strict condition requiring “current employment” at the company when the commission is earned would not be enforced. Additionally, an employee could make the argument that his/her employer fired him/her to specifically avoid paying him/her the commission becoming due. Such a showing of “bad faith” could lead to a claim for wrongful termination.
As is clear from the recent appellate court case and the discussion above, commission wage structures can be difficult to interpret. If your employer has failed to pay you commission wages earned, please contact Richardson “Red” Griswold of Griswold Law at (858) 481-1300 or rgriswold@griswoldlawsandiego.com for a free consultation.
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