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socrateaser, Lawyer
Category: California Employment Law
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Experience:  Retired (mostly)
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My employer wants me to sign a new pay plan that states that

Resolved Question:

My employer wants me to sign a new pay plan that states that my commissions (a percentage of sales generated) earned in a period that ends on 12/31/11 will not vest until 2/1/11 and that I must be employeed with the company in February to receive the "bonus". This contridicts what I've read regarding "commissions" vs. "Bonus'" and I beleive that commissions are like wages- must be calculated and paid to term regardless.

They are saying that their labor legal counsel says that the payment plan is structured according to the agreement between employer and employee--so the law doesn't apply?

Can you please clarify?
Submitted: 5 years ago.
Category: California Employment Law
Expert:  socrateaser replied 5 years ago.

This is a very complicated issue.

An employer's promise of a bonus or other benefit after a specified length of employment does not affect the employer's right to fire an at-will employee. If the employee is discharged without cause, the employee may recover at least a pro-rata share of the promised bonus or benefit. On the other hand, employees who voluntarily quit before the bonus calculation date are not entitled to a bonus.

Thus, on your facts, changing your bonus calculation date would entitle you to be paid prorata percentage for the bonus earned up until the previously agreed-upon bonus date, and then beginning on the date that you agree to the new plan, you would be entitled to a prorata share calculated by the new bonus date.

Example: You have worked 216/365ths of the year, so you are entitled to 59.2% of the bonus, calculated as of 12/31/2011. From today going forward, there are 181 days until 2/1/2012, so you would be entitled to 49.6% of any bonus calculated as of 2/1/2012.

Re commissions, you are entitled to be paid for commissions that are fully earned, no matter when you quit or are fired. A commission is fully earned when there is nothing more required in order to complete the sale leading to the commission. See Schachter v. Citigroup, Inc. (2009) 47 Cal.4th 610, 622.

However, if you agree in writing that you are not entitled to a commission or bonus after your employment has terminated, then that agreement controls your contract rights. You would have to show the court that the employer's termination was an unfair business practice or a breach of good faith, which is legally possible, but difficult to prove. See Nein v. HostPro, Inc. (2009) 174 Cal.App.4th 833.

Thus, if you agree to give up your commission and bonus rights if you are not employed at the time your commission is due, you could be fighting in court to collect. So, you may want to refuse, and let the employer terminate your employment.

f you choose to refuse, then you may want to put that refusal in writing and mail it to the employer certified mail return receipt requested. That way, if you continue to work, the employer will have consented by performance to your refusal, rather than you having consented by performance to the change in commission structure.

Hope this helps.

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