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Patrick, Esq.
Patrick, Esq., Lawyer
Category: California Employment Law
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Experience:  Significant experience in all areas of employment law.
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my company rescinds commissions paid if a client pays after

Customer Question

my company rescinds commissions paid if a client pays after 120 days, even if by just a few hours late. is that legit? thanks
Submitted: 3 years ago.
Category: California Employment Law
Expert:  Patrick, Esq. replied 3 years ago.
Hello and thank you for entrusting me to answer your question.

Is this feature of your commissions agreement in writing? Is your employer attempting to retroactively impose it? (i.e. you made sales before this went into effect and now your employer is attempting to deprive you of commissions you previously earned)

I very much look forward to helping you on this matter.
Customer: replied 3 years ago.
In years past we have had to sign an agreement to this system but no such agreement was signed in 2013.
Expert:  Patrick, Esq. replied 3 years ago.
Claudia,

Thank you very much for your reply.

Agreements of this nature do not need to be re-signed each year. So, if you had signed this agreement at some point in the past, it would still have force and effect unless the agreement specifically included a date of expiration.

Assuming that the agreement is in writing and that your employer is not retroactively attempting to apply it to commissions earned prior to the agreement going into effect, it would be legal. Generally speaking, commission agreements are creatures of contract, and as such, can be modified and tailored in any manner that the parties choose.

The one limitations on commission agreements in general is that an employee whose entire compensation is commissioned based must earn the equivalent of minimum wage for all hours worked. This is a "floor" which employees cannot go below, and if they do, they are liable for the difference between the commission wages actually paid and the amount of minimum wage.

For example, if you worked 40 hours in a pay period but only made $200 worth of commission, your pay for that pay period would fall $120 short of minimum wage (8 x 40 = 320) and so your employer would be required to make up the difference (i.e. pay you $120).

Thus, if your employer's policy of not considering commissions "vested" until 120 days (and then revoking commissions for which the client doesn't pay by that date) results in you earning less than the equivalent of minimum wage for the affected pay period, your employer would be required to make up the difference and pay the the minimum wage equivalent.

So, while the commission agreement itself is permissible, your employer may potentially be liable to pay you the equivalent of minimum wage for all hours you actually work if the recission of commissions would put you below that level.

I hope that makes sense.

Please do not hesitate to let me know if you have any questions or concerns regarding the above and I will be more than happy to assist you further.

If you do not require any further assistance, please be so kind as to provide a positive rating of my service so that I may receive credit for assisting you. Very best wishes to you and thank you so much for coming to Just Answer.

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