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socrateaser, Lawyer
Category: California Employment Law
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Experience:  Retired (mostly)
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I work for a brokerage firm. My pay from my commissions, draw

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I work for a brokerage firm. My pay from my commissions, draw and bonus pool (that I set aside to pay a retiring partner) had been paid to me incorrectly over 6 1/2 months. The firm says I was over paid and is now taking my entire paycheck I was told yesterday that would have been paid to me this Friday.

What are my rights? Can they just do that without doing an audit (which I requested) and negotiating a repayment

I'm under contract and supposed to arbitrate disputes.
There is no case law exactly on point for California. However, the following law is helpful in determining your rights and obligations:

Although any chargeback against “wages” is unlawful (LaborCode. § 221), an employee who receives both wages and sales commissions may agree in writing to a chargeback against commissions for commissions advanced by the employer if the sale later falls through (e.g., the customer returns the merchandise): “An advance ... by definition is not a wage because all conditions for performance have not been satisfied.” [Steinhebel v. Los Angeles Times Communications (2005) 126 CA4th 696, 705, 24 CR3d 351, 357 (newspaper's agreement with its telephone sales employees provided for an immediate “advance against commissions” subject to a chargeback against future commissions if the customer did not keep the subscription for at least 28 days); Koehl v. Verio, Inc. (2006) 142 CA4th 1313, 1329–1337, 48 CR3d 749, 761–767 (Internet service provider's salespersons expressly agreed to compensation plan whereby they received half commission [not called an advance] after order booked, subject to chargeback if certain conditions not met)

A commission chargeback may be unlawful where the commission was fully earned at time of sale (payment not an advance) and the employee has not agreed in writing to the chargeback. Harris v. Investor's Business Daily, Inc. (2006) 138 CA4th 28, 40, 41 CR3d 108, 117, 138 CA4th at 41, 41 CR3d at 118.

Similarly, the employer may not charge back commissions on returned merchandise sold by other employees or when the selling employee cannot be identified. Employees cannot be made the “insurers of the employer's business losses.” Hudgins v. Nieman Marcus Group, Inc. (1995) 34 CA4th 1109, 1123, 41 CR2d 46, 55 (no deductions from earned commissions of individual employees for commissions paid to others).

Comment: Your facts don't disclose sufficient information to determine whether your commissions were fully earned. Assuming that they were, and the employer miscalcuated the commissions due, and further assuming that you agreed in writing in your commission agreement to chargebacks against your commissions for errors, then the employer could reduce your pay to offset its error.

However, the failure to provide you with an accounting, in my view, would be a breach of the covenant of good faith, sufficient to raise a viable arbitration action, and/or sufficient to complain to the Division of Labor Standards Enforcement.

Also, if you receive base wages, then those wages cannot be used to offset your commissions, and that is ostensibly a misdemeanor.

So, you may want to file a wage claim with the DLSE and let them investigate for you.

Hope this helps.

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