California Commission Dispute Demand Letter Guide

📋 What is a Commission Dispute?

Commission disputes arise when employers fail to pay earned sales commissions, improperly calculate commission amounts, or refuse to pay commissions upon termination. California has strong protections for commissioned employees, including requirements for written commission agreements and strict rules on when commissions must be paid.

When to Use This Guide

Use this guide if your employer:

💰 Failed to Pay Earned Commissions

Refused to pay commissions on closed deals, completed sales, or achieved quotas

📝 No Written Agreement

Never provided a written commission agreement as required by Labor Code 2751

📈 Changed Commission Structure

Retroactively modified commission rates or added new conditions after sales were made

🚫 Withheld Post-Termination

Refused to pay commissions earned before termination or on deals in progress

👍 What You Can Recover in Commission Disputes

Unpaid commissions - All commissions earned but not paid
Waiting time penalties - Up to 30 days' wages for failure to pay upon termination
Interest - 10% per annum on unpaid wages under Civil Code 3289
Attorney fees and costs - Prevailing employees recover legal costs under Labor Code 218.5
PAGA penalties - Additional penalties for representative claims

When Are Commissions "Earned"?

💰 The General Rule

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Under California law, commissions are "earned" when the employee has satisfied all the conditions for entitlement set forth in the commission agreement. Typically, this occurs when the sale closes, the customer pays, or the employee meets their quota - whichever the agreement specifies.

📝 Written Agreement Required

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Labor Code 2751 requires employers to provide a written commission agreement setting forth the method of computation and payment. If no written agreement exists, the employee's reasonable understanding of the commission terms controls, and the lack of agreement itself is a Labor Code violation.

📅 When Payment is Due

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Labor Code 204.1 requires commissions to be paid at least twice per month (like other wages) on established paydays. However, commissions may be paid once per month if the employer calculates them monthly. Once earned, commissions must be paid promptly and cannot be delayed indefinitely.

🚫 Post-Termination Rights

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Commissions earned before termination must be paid within the timeframes required by Labor Code 201-202 (immediately upon discharge, within 72 hours upon resignation). Employers cannot forfeit earned commissions just because the employee left. Deals "in progress" at termination may also generate commissions that must be paid when they close.

⚠ Beware of Forfeiture Clauses

Many commission agreements contain clauses that purport to forfeit commissions if the employee resigns or is terminated. Under California law, such clauses are generally unenforceable as to commissions already earned. An employer cannot reclaim wages already earned by the employee.

⚖ Legal Basis

California provides robust protections for commissioned employees. These statutes and case law support your claim.

Key California Statutes

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California Labor Code Section 2751

Requires employers to provide a written contract to employees paid on a commission basis. The contract must set forth the method of computing and paying commissions. The employee must be given a signed copy. Violation of this section supports a claim for unpaid wages.

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California Labor Code Section 204.1

Mandates that commissions be paid at least twice during each calendar month on days designated in advance as regular paydays. Allows monthly payment if employer uses monthly calculation method. Establishes that commissions are "wages" entitled to all wage protections.

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California Labor Code Sections 201-203

Requires all earned wages, including commissions, to be paid immediately upon discharge or within 72 hours of resignation. Section 203 imposes "waiting time penalties" of up to 30 days' wages for willful failure to pay.

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California Labor Code Section 218.5

Allows prevailing parties in wage claims to recover reasonable attorney fees and costs. This makes it economically feasible to pursue smaller commission claims that might otherwise not justify litigation costs.

Key California Cases

⚖ Schachter v. Citigroup (2009)

Established that once commissions are earned, they become vested wages that cannot be forfeited upon termination

⚖ Koehl v. Verio (2006)

Held that employers cannot retroactively change commission agreements to reduce commissions on sales already made

⚖ Steinhebel v. Los Angeles Times (2005)

Clarified that commission agreements must clearly define when commissions are "earned" to be enforceable

⚖ Deleon v. Verizon (2017)

Confirmed commissions are wages under California law, entitled to all statutory wage protections

Elements You Must Prove

Commission agreement - Written or implied agreement establishing commission compensation
Performance - You performed the work or closed the sales generating the commission
Commission earned - You satisfied all conditions to earn the commission under the agreement
Non-payment - The employer failed to pay the commission when due
Amount owed - Quantifiable commission amount based on the agreement terms

💡 No Written Agreement? You May Still Have a Claim

If your employer failed to provide a written commission agreement as required by Labor Code 2751, your reasonable understanding of the commission terms will control. Additionally, the lack of a written agreement is itself a Labor Code violation that may support additional penalties and claims.

✅ Evidence Checklist

Gather these documents before sending your demand letter. Click to check off items as you collect them.

📄 Commission Documents

✓ Written commission agreement or plan
✓ Any amendments or updates to commission plan
✓ Emails discussing commission terms or rates
✓ Offer letter referencing commission structure

📈 Sales Records

✓ List of closed deals and sale amounts
✓ CRM records showing your sales activity
✓ Commission statements from employer
✓ Pipeline reports showing deals in progress

💰 Payment Records

✓ Pay stubs showing commission payments
✓ Bank statements showing deposits
✓ Commission calculation worksheets
✓ Final paycheck documentation

📩 Communications

✓ Emails about commission calculations
✓ Requests for commission payment
✓ Employer's responses or denials
✓ Termination letter or documentation

🔒 Request Your Personnel File

Under Labor Code Section 1198.5, you have the right to inspect your personnel file including any signed commission agreements. Request copies immediately if you do not have them. Also request all commission statements and calculations under Labor Code 226.

💰 Calculate Your Damages

Commission disputes in California can include substantial penalties beyond the unpaid commissions themselves.

Category	Description
Unpaid Commissions	All commissions earned but not paid, calculated per agreement terms
Waiting Time Penalties	Up to 30 days' wages at daily rate (Labor Code 203)
Interest	10% per annum from date commissions were due (Civil Code 3289)
Wage Statement Penalties	$50-$4,000 for inaccurate pay stubs (Labor Code 226)
PAGA Penalties	$100-$200 per pay period per violation if representative action
Attorney Fees	Reasonable fees and costs for prevailing employee (Labor Code 218.5)

💰 Calculating Your Daily Wage Rate

For waiting time penalties, your daily rate includes your average commission earnings. Calculate by taking your total commission earnings over the past 12 months and dividing by 260 (working days). This can significantly increase the penalty amount for high-earning salespeople.

📊 Sample Damages Calculation

Example: Senior Sales Rep, $150,000/year total comp (base + commission)

Unpaid commissions (Q4 2024) $28,500

Daily wage rate ($150,000 / 260) $577/day

Waiting time penalties (30 days x $577) $17,310

Interest (10% x 6 months) $1,425

Wage statement penalties (12 pay periods) $1,200

TOTAL CLAIM (before attorney fees) $48,435

💡 Post-Termination Commissions

If deals were in your pipeline when you left, you may be entitled to commissions when those deals close. Review your commission agreement for "tail" or post-termination commission provisions. Even without such provisions, courts have awarded post-termination commissions where the employee substantially contributed to the sale.

📝 Sample Language

Copy and customize these paragraphs for your demand letter.

Opening Paragraph

I am writing to formally demand payment of unpaid commissions owed to me from my employment with [COMPANY NAME]. I was employed as [JOB TITLE] from [START DATE] to [END DATE]. Despite earning commissions on completed sales totaling $[AMOUNT], you have failed to pay these wages as required by California Labor Code Sections 204.1, 2751, and related provisions.

Commission Calculation

Under my commission agreement dated [DATE], I was entitled to a commission of [PERCENTAGE/FORMULA] on all closed sales. During the period from [START DATE] to [END DATE], I closed sales totaling $[TOTAL SALES]. Applying the agreed commission rate, I earned commissions of $[COMMISSION AMOUNT]. To date, I have received only $[AMOUNT PAID], leaving an unpaid balance of $[AMOUNT OWED].

No Written Agreement Claim

California Labor Code Section 2751 requires employers to provide a written contract setting forth the method of computing and paying commissions. You failed to provide me with any written commission agreement during my employment. Based on verbal representations made by [NAME/POSITION] and the commission rates paid to me historically, I reasonably understood my commission rate to be [PERCENTAGE/FORMULA]. Your failure to provide a written agreement as required by law supports my claim and may result in additional penalties.

Waiting Time Penalty Demand

My employment ended on [TERMINATION DATE]. Under Labor Code Section 201/202, all earned wages including commissions were due immediately upon discharge (or within 72 hours of my resignation). Your willful failure to pay these earned commissions subjects you to waiting time penalties under Labor Code Section 203. Based on my daily wage rate of $[DAILY RATE], the maximum penalty of 30 days amounts to $[PENALTY AMOUNT].

Total Demand

I hereby demand payment of the following within [14/30] days: (1) unpaid commissions of $[AMOUNT]; (2) waiting time penalties of $[AMOUNT]; and (3) interest of $[AMOUNT]. If payment is not received by [DEADLINE DATE], I will pursue all available legal remedies, including filing a claim with the California Labor Commissioner and/or a civil lawsuit. Under Labor Code Section 218.5, I will also seek recovery of attorney fees and costs.

🚀 Next Steps

What to do after sending your demand letter and understanding your legal options.

Filing Options

📌 California Labor Commissioner (DLSE)

File a wage claim with the Division of Labor Standards Enforcement (DLSE) at any local Labor Commissioner office. This is a free administrative process that does not require an attorney. The DLSE will schedule a hearing (Berman hearing) where you can present your case. File online at dir.ca.gov/dlse.

Timeline

Week 1

Send demand letter via certified mail and email to HR/legal department

Week 2-4

Allow response time, continue gathering evidence, consider settlement offers

Week 4-6

If no satisfactory response, file DLSE wage claim or consult attorney

Month 3-6

DLSE Berman hearing or civil litigation discovery process

If They Don't Respond or Settle

File DLSE Wage Claim
The Labor Commissioner process is free and designed for employees without attorneys. You can recover unpaid wages, waiting time penalties, and interest. File at any DLSE district office or online.
Small Claims Court
For claims up to $10,000, small claims court is fast and informal. You can recover unpaid commissions, but waiting time penalties may require a separate action. No attorneys are allowed.
Civil Lawsuit
For larger claims or to recover attorney fees, file suit in Superior Court. Employment attorneys often take commission cases on contingency because attorney fees are recoverable. Lawsuit also preserves PAGA claims.
Consider PAGA
If the employer's commission violations were systemic (affecting multiple salespeople), you may file a PAGA representative action for civil penalties. This can significantly increase recovery and settlement leverage.

Need Legal Help?

Commission disputes often involve complex calculations and require strategic negotiation. Many employment attorneys handle commission cases on contingency. Get a strategy call to evaluate your claim.

Book Consultation - $125

California Resources

California Labor Commissioner (DLSE): dir.ca.gov/dlse - File wage claims, find local offices
DLSE FAQ on Commissions: dir.ca.gov/dlse/FAQ_Commissions.htm
California Courts Self-Help: selfhelp.courts.ca.gov - Small claims information
State Bar Lawyer Referral: calbar.ca.gov - Find employment attorneys
Legal Aid at Work: legalaidatwork.org - Free assistance for low-wage workers