Recover earned commissions and bonuses withheld by your employer
Commissions and Bonuses Are Wages
Under both federal and California law, earned commissions are wages, not discretionary gifts. Once you've met the conditions for a commission (e.g., sale closes, customer pays), the employer cannot withhold it, reduce it retroactively, or implement clawback provisions without clear advance agreement.
🔍 Key Distinction:Non-discretionary bonuses (based on performance metrics, attendance, productivity) are wages. Discretionary bonuses (employer decides amount and recipient at will) are not legally owed, but true discretion is rare—most "discretionary" bonuses are actually non-discretionary under legal analysis.
California Commission Law (Labor Code § 2751)
California Labor Code § 2751 requires that commission agreements be in writing and provide a copy to the employee. Key rules:
Written agreement required: Must specify how commissions are calculated and when they are earned and payable
"Earned" vs. "payable": A commission is earned when you complete the required act (e.g., sale closes); it becomes payable per the agreement's schedule (e.g., monthly, upon customer payment)
No retroactive changes: Employer cannot change commission terms retroactively to reduce already-earned commissions
Termination: Earned commissions must be paid in the final paycheck, subject to the commission agreement's terms
Waiting time penalties: Failure to pay earned commissions on termination triggers Labor Code § 203 penalties (up to 30 days' wages)
Common Commission Disputes
Scenario
Is Commission Owed?
You closed a sale, but were fired before the customer paid
✅ Yes, if agreement says commission is earned when sale closes, not when customer pays
Employer changed commission rate after you earned it
✅ Yes, retroactive changes to earned commissions are illegal
Employer imposed a "clawback" after you left
✅ Maybe—clawbacks are only enforceable if clearly spelled out in original written agreement
Customer canceled order after you were paid commission
❌ Employer can recoup if agreement explicitly allows chargebacks for cancellations
Employer says bonus was "discretionary"
✅ Likely owed if bonus was tied to measurable goals (sales targets, attendance, etc.)
You quit before commission was "payable" under the plan
✅ Depends on agreement—some plans forfeit unpaid commissions on voluntary termination, but must be clear
⚠️ "At-Will" Employment Doesn't Mean Forfeit Wages: Even if you're an at-will employee, the employer cannot withhold earned commissions just because you were fired or quit. Once earned, commissions are wages that must be paid.
Federal Law: FLSA and Wage Payment Acts
Outside California, state wage payment acts govern commission disputes. Key principles:
Commissions are wages: Most states treat earned commissions as wages subject to wage payment laws
Final paycheck timing: Varies by state (immediately, next payday, or within 7–14 days)
Forfeiture clauses: Some states allow forfeiture-for-cause provisions; others (like CA) limit them severely
Regular rate for overtime: Non-discretionary commissions must be included in the "regular rate" for calculating overtime pay under FLSA
Discretionary vs. Non-Discretionary Bonuses
A bonus is non-discretionary (and therefore owed as wages) if:
It's based on measurable criteria (sales quotas, hours worked, productivity targets)
Employees have a reasonable expectation of receiving it (annual pattern, written policy)
The amount is predetermined or calculable
It's promised in advance as an incentive
A bonus is discretionary (not owed) only if:
Employer has sole discretion over whether to award it and how much
No advance promise or measurable criteria
Amount varies arbitrarily year-to-year
✅ Burden of Proof: In California, once you show the employer agreed to pay commissions/bonuses, the employer must prove any defenses (e.g., you didn't meet the criteria, the bonus was discretionary, a valid forfeiture clause applies).
Step 1: Review Your Commission/Bonus Agreement
Gather all documents that define your compensation:
Commission plan or agreement: Written terms specifying rates, triggers, payment schedule
Offer letter or employment contract: May reference commission structure
Emails or memos: Communications promising bonuses or explaining commission changes
Historical pay stubs: Show pattern of past commission/bonus payments
📝 No Written Agreement? California Labor Code § 2751 requires commission agreements to be in writing, but if the employer failed to provide one, the commission terms can be proven through testimony, emails, past practice, and parol evidence. The employer's failure to comply with § 2751 strengthens your claim.
Step 2: Document Your Earned Commissions
Create a spreadsheet showing each commission-triggering event:
Date
Customer/Deal
Sale Amount
Commission Rate
Commission Owed
Amount Paid
Shortfall
1/15/24
Acme Corp
$50,000
5%
$2,500
$0
$2,500
2/10/24
XYZ Inc
$30,000
5%
$1,500
$750
$750
TOTAL UNPAID COMMISSIONS:
$3,250
Step 3: Add Statutory Damages and Penalties
In California, unpaid commissions can trigger additional damages:
Penalty/Damage
When It Applies
Amount
Waiting Time Penalties (§ 203)
Earned commissions not paid in final paycheck
Up to 30 days of wages (daily wage × 30)
Liquidated Damages (FLSA)
Federal minimum wage or OT violations
100% of unpaid amount
Wage Statement Penalties (§ 226)
Pay stubs failed to show commission amounts
$50 initial + $100 per subsequent violation (max $4,000)
Attorneys' Fees
Prevailing in wage claim
Reasonable fees and costs
Example Total Calculation
Scenario: You were fired with $10,000 in earned commissions unpaid. Your average daily wage (including base + commissions) was $300/day.
Item
Amount
Unpaid commissions
$10,000
Waiting time penalty (30 days × $300)
$9,000
Interest (10% per year × time elapsed)
$500 (estimate)
TOTAL CLAIM
$19,500
Plus attorneys' fees if you hire counsel
⚠️ Regular Rate Impact: If unpaid commissions caused your regular rate to be higher, you may also be owed additional overtime pay. For example, if you worked 50 hours/week and your employer didn't include commissions in the regular rate calculation, you're owed retroactive OT adjustments.
Evidence to Gather
Signed commission agreement or plan document
Offer letter referencing commissions/bonuses
Sales reports, invoices, or CRM records showing your deals
Penalties and damages: Waiting time penalties, interest, attorneys' fees
Deadline: 14–21 days to pay in full or provide detailed explanation
Sample Opening
Dear [Employer]:
I am writing to demand immediate payment of unpaid commissions [and/or bonuses] owed to me under our commission agreement and California law. I was employed by [Company] as a [job title] from [start date] through [end date]. My compensation included a base salary of $[X] plus commissions calculated at [Y%] of closed sales [or: bonuses based on achievement of quarterly sales targets].
During my employment, I earned total commissions of $[amount], of which you have paid only $[amount paid], leaving a balance of $[unpaid amount]. Under California Labor Code § 2751, commissions are wages that must be paid according to the terms of our written agreement. [OR: Under our oral agreement and established practice, I was entitled to receive commissions upon closing of sales, which I completed as detailed below.]
Itemized Commission/Bonus Details
The following commissions were earned but never paid:
Date Earned
Customer/Deal
Sale Amount
Commission Rate
Commission Owed
1/15/2024
Acme Corp contract
$50,000
5%
$2,500
2/20/2024
XYZ Inc renewal
$30,000
5%
$1,500
TOTAL UNPAID COMMISSIONS:
$4,000
Each of these commissions was earned under the terms of our agreement when the sale closed and the contract was executed. You were obligated to pay these commissions [in my final paycheck / within 30 days of sale close / per the payment schedule], but failed to do so.
Penalties and Legal Claims
Your failure to pay these earned commissions in my final paycheck constitutes a violation of California Labor Code §§ 201–203. Under § 203, I am entitled to waiting time penalties equal to my daily rate of pay for each day the wages remain unpaid, up to 30 days. My average daily wage was approximately $[X], resulting in waiting time penalties of up to $[30 × daily wage].
In addition, I am entitled to recover prejudgment interest at 10% per annum and my attorneys' fees and costs if I am forced to litigate this matter (Labor Code §§ 218.5, 1194).
Total Amount Due:
Unpaid commissions: $[X]
Waiting time penalties (§ 203): $[Y]
Interest: $[Z]
TOTAL: $[X+Y+Z]
Closing and Deadline
I expect payment in full within 14 days of the date of this letter. If payment is not received by [specific date], I will have no choice but to file a wage claim with the California Labor Commissioner and/or pursue my claims in court, where I will seek the full amount of unpaid wages, waiting time penalties, interest, and attorneys' fees.
Please send payment via [check/wire transfer] to [address/account]. If you dispute any portion of this claim, provide a detailed written explanation with supporting documentation within the same 14-day period.
Sincerely, [Your Name] [Contact Information]
✅ Attach Supporting Documents: Include copies (not originals) of your commission agreement, sales reports, invoices, emails confirming deals, and any correspondence about the unpaid amounts. The more documentation, the stronger your demand.
Who to Send Your Demand To
CFO or Controller: Handles payroll and commission payments
VP of Sales or Sales Manager: If commissions are disputed based on sales terms
Human Resources: For separation-related disputes or policy questions
General Counsel or Legal Department: Larger companies with in-house counsel
CEO or Owner: Small businesses or startups
Registered Agent: For formal legal notice or if litigation is imminent
📬 Send via Certified Mail: Use USPS certified mail with return receipt to create proof of delivery. Also email a copy to the relevant decision-makers for faster response, but keep the certified mail receipt for litigation.
What to Expect After Sending
Response
What It Means
Your Next Step
Full payment
Employer acknowledges debt and pays in full
Execute release; confirm penalties are included
Partial payment or settlement offer
Employer disputes amount or seeks compromise
Negotiate or reject and escalate to Labor Commissioner or court
Denial
Employer claims commissions weren't earned or agreement allows forfeiture
File DLSE wage claim or lawsuit
No response
Employer ignores demand
File DLSE claim or lawsuit before deadline expires
Counterclaim (e.g., chargebacks, overpayment)
Employer asserts you owe money back
Review agreement for valid offset provisions; dispute if improper
⚠️ Don't Sign Releases Prematurely: If the employer offers a settlement, carefully review any release language. Ensure you're being paid for all unpaid wages (including waiting time penalties) and that the release doesn't waive unrelated claims (e.g., discrimination, wrongful termination).
Negotiation Tips
Know your bottom line: Decide in advance the minimum you'll accept (e.g., full commissions + 50% of penalties)
Emphasize fee-shifting: Remind employer that if you win in court, they'll pay your attorney's fees on top of the judgment
Highlight waiting time penalties: These penalties accrue daily and can double the claim—early settlement saves the employer money
Document all communications: Keep emails, letters, and notes of phone calls—these are evidence if you litigate
Set deadlines: Give employer 7–10 days to respond to counteroffers; don't let negotiations drag out indefinitely
If You Receive a Counterclaim
Employers sometimes assert you owe money (e.g., "chargebacks" for canceled orders, overpayments, unreturned equipment). Respond by:
Reviewing the commission agreement for any valid offset or clawback provisions
Demanding documentation (invoices, credit memos, proof of overpayment)
Disputing any offsets not explicitly authorized by the agreement
Noting that under CA law, deductions from wages require written employee consent (Labor Code § 221)
Option 1: File with California Labor Commissioner (DLSE)
California employees can file a wage claim with the Division of Labor Standards Enforcement at no cost.
Unpaid wages, waiting time penalties, interest; DLSE cannot award attorneys' fees
Timeline
Hearing typically 6–12 months after filing; either party can appeal to superior court
Advantages
No legal fees; informal process; DLSE investigates and subpoenas employer records
Disadvantages
Slower than court; no attorneys' fees recovery; employer can "de novo" appeal and force you into court anyway
Option 2: File a Lawsuit in Court
You can bypass the Labor Commissioner and file directly in superior court (state law claims) or federal court (FLSA claims).
Aspect
Details
Venue
California Superior Court (wage claims) or Federal District Court (if FLSA overtime issue)
Remedies
Unpaid wages + waiting time penalties + interest + attorneys' fees and costs
Statute of Limitations
3 years for wage claims (Labor Code § 1194); 4 years for UCL claims
Discovery
Full civil discovery—depositions, subpoenas, interrogatories to uncover all unpaid amounts
Class Actions
If employer systematically withheld commissions from multiple employees, can pursue class action
Timeline
6–18 months to trial; many settle within 3–6 months
✅ Attorneys' Fees Are a Game-Changer: California Labor Code §§ 218.5 and 1194 require the employer to pay your attorney's fees if you prevail. This makes it economically feasible to hire counsel even for moderate-sized claims ($5,000+).
You were also denied overtime or other wage protections
Multiple employees were affected (class action potential)
Employer has sophisticated legal counsel
You want to maximize recovery by including waiting time penalties and attorneys' fees
Statute of Limitations Cheat Sheet
Claim Type
Statute of Limitations
Unpaid commissions (CA wage claim)
3 years
Breach of written contract
4 years
Breach of oral contract
2 years
UCL (unfair competition) claim
4 years
FLSA unpaid overtime
2 years (3 if willful)
How I Can Help
I represent employees in commission and bonus disputes, from pre-litigation demand letters through trial. I focus on maximizing your recovery while minimizing your out-of-pocket costs by leveraging California's fee-shifting statutes.
Services Offered
Commission agreement analysis: Review and interpret your agreement to determine what's owed
Damages calculation: Itemize unpaid commissions, bonuses, waiting time penalties, and interest
Demand letter drafting: Persuasive pre-litigation demand with detailed factual and legal support
Negotiation: Secure maximum settlement without litigation
DLSE representation: Represent you at Labor Commissioner hearings
Court litigation: File and prosecute wage claims in superior court or federal court
Class actions: Pursue class claims if employer systematically withheld commissions from multiple employees
My Approach
Comprehensive audit: I review all commission/bonus agreements, sales records, pay stubs, and communications to identify every dollar owed
Multi-theory recovery: I don't just claim unpaid commissions—I also pursue waiting time penalties, wage statement violations, and interest to maximize damages
Strategic demands: I draft demand letters that emphasize the employer's exposure to penalties and attorneys' fees, creating settlement pressure
Fee-shifting leverage: I use California's mandatory fee-shifting laws to negotiate favorable settlements—employers know they'll pay my fees if they lose
Class action assessment: If your employer has a pattern of withholding commissions, I explore class action options to multiply recovery and deter future violations
📞 Unpaid Commissions or Bonuses?
Contact me for a consultation. I'll review your agreement, calculate what you're owed, and recommend the best path forward.
No. Once a commission is earned under the terms of your agreement, the employer cannot retroactively reduce it. Employers can change commission rates prospectively (for future sales), but they must provide notice and the new rate only applies to commissions earned after the change.
California courts disfavor forfeiture clauses and interpret them narrowly. If the agreement clearly states that unpaid commissions are forfeited upon voluntary resignation and this was prominently disclosed when you signed, the clause may be enforceable. However, if the clause is ambiguous, buried in fine print, or you were terminated (not resigned), you can likely recover the commissions.
It depends on the agreement. Many agreements say commissions are earned when the sale closes but payable when the customer pays. If the agreement is silent, courts often find that commissions are earned when the employee completes the required act (e.g., closes the sale), not when the customer pays. Review your agreement carefully.
Only if the commission agreement explicitly allows chargebacks for cancellations or refunds. If the agreement is silent, the employer generally cannot recoup commissions you were already paid. Any chargebacks must also comply with Labor Code § 221 (no illegal deductions from wages) and require your written consent.
True discretionary bonuses (where the employer has complete discretion over whether to pay and how much) are not owed. However, most "discretionary" bonuses are actually non-discretionary because they're based on measurable criteria (sales targets, tenure, performance metrics). If you can show the bonus was tied to objective goals or there's a pattern of paying it, it's likely owed as wages.
Yes. California Labor Code §§ 218.5 and 1194 require the employer to pay your reasonable attorneys' fees and costs if you prevail in a wage claim. This is a one-way fee-shift—you can recover fees if you win, but the employer cannot recover fees from you if they win. This makes it economically viable to hire an attorney even for moderate claims.