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socrateaser, Lawyer
Category: California Employment Law
Satisfied Customers: 38879
Experience:  Retired (mostly)
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I work for a large bank in a salary plus commission position.

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I work for a large bank in a salary plus commission position. Our commission is recurring and based on a rolling book of business. For instance, each month I get a percentage of the profit in all the accounts in my portfolio. However we also have to sign 10 new accounts every month or else they won't pay us on our book of business. We lose our recurring commission if we don't meet the monthly quota. However our company requires us to take vacation, and when we take a scheduled vacation, they do not lower the monthly quota for new accounts. Is it legal for them to require us to take vacation but then not pay us on our recurring book of business if we don't meet our monthly quota during the month we take vacation?

I make 150,000/year and 39,000 of it is salary so my commission is a huge part of my pay.

In addition, in the other divisions of the bank they DO get goal relief when they take vacation but not in our division. How is this legal?

California law prohibits an employer from taking back commissions which are fully earned. Cal. Labor Code § 221; Harris v. Investor's Business Daily, Inc. (2006) 138 CA4th 28, 40.

Whether or not commissions are fully earned is a mixed question of fact and law, because while the contract of employment generally controls whether or not the employee has done everything necessary to earn a commission, a court will not permit an employer to structure a commission agreement in a manner that in substance allows the employer to take back an earned commission.

Based on your alleged facts (which are extremely complex), it would appear that you have earned certain commissions in a prior pay period, and you have been paid on those commissions. Then, during a subsequent pay period, the employer seems to be commingling previous earnings with new earnings to create a new commission obligation. The result of this, in my opinion, is to grant you new commissions on previous earnings (sort of a "residual" payment as would exist in the motion picture or tv industry), in addition to commmissions on new earnings.

In my opinion, the residual payment is earned income, which cannot be reversed by the employer, because you already earned the money in the past. The fact that you were already paid for those commissions once is irrelevant, because the employer is allowing you to use them again. By conditioning the "residual" payment on a certain amount of new business, the employer has created a system under which it can take back the residual. This would be like only earning the residual for a tv show, if the actor performs in 10 new tv shows. One thing has nothing to do with the other. So, I think you have a valid complaint here.

Concerning the new business, I see a different argument. Pretend you are a car salesperson. You sell nine vehicles during the month, and you receive $0 commissions. But, if you sell 10 vehicles you receive commissions on all 10 vehicle sales. The employer has created a threshold of business that effectively makes it impossible for you to earn money on revenue to the employer, which you actually earned. It doesn't matter that sale #1 may have been for a Rolls Royce, and that #2-10 were for a $500 salvage car. You don't get paid anything for selling the Rolls, unless you sell the #10 junker. To me, this is an unconscionable (shockingly unfair) agreement, which a court may not enforce. The counterargument is that you are a highly-compensated employee who has bargaining leverage that is not available to the typical worker. In sum, it's a judgment call, and so you would have to bring a wage claim or lawsuit against the employer to determine whether or not the contract is actually depriving you of earned commissions which the employer has cleverly contrived various hurdles by which it can take back your earnings.

I realize that you have characterized your circumstances as a combined deal, and that the vacation issue is somehow the key to whether or not you receive commissions -- along with the fact that all employees are not treated equally concerning the vacation period protection. However, I view these issues as irrelevant to whether or not you have a claim, and I believe that a court would do similarly, because the real issue is not the vacation -- it's the 10 new business entries as a bar to any commission payment on the residual.

If you want to let the government try to figure out the mess, then you can file a complaint with the Division of Labor Standards Enforcement (DLSE). The agency may be reluctant to take your case -- because there are loads of minimum wage workers in the queue at any given instant. But, you have the same right to file a wage claim as anyone else.

So, you may get more personal attention by hiring a private employment rights attorney. See this link for a referral.

There is one good reason for starting the case through the DLSE: it will immunize you from being terminated, under the "whistleblower law" (Cal. Labor Code 1102.5). And, if the goverment decides that your case is too complicated for the administrative process, then you can hire a lawyer and appeal to the Superior Court and maintain the immunity from termination.

I think that about covers the issues. Happy Holidays.

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Customer: replied 4 years ago.
Thanks for the detailed reply however, I don't think the income from my book of business is considered earned until the month I actually get paid for it. The commission from my book of business is based on what my clients produce in profit for that month. It's different every month. For instance my book my generate 30000 in profit one month and 25,000 another month. I get a commission on that. However if I don't sign 10 new clients in a month they don't pay me my commission on my book of business. Please advise. Thank you
I don't think that your additional information changes the argument. And, I can see both sides.

The issue is whether or not the payment of commissions on the business generated from your previously-generated sales is the product of those old sales, or the product of the new sales. That is, (1) is the commission being paid because you originally made a sale that throws off continuing profits; or (2) is the commission, not a commission at all, but rather a bonus granted to you because you brought in a certain amount of new business during a subsequent month?

If #1, then the 10-sale per month barrier is taking back commissions already earned (i.e., the "right" to the future commissions was earned when you made the original sale). If #2, then the 10-sale per month barrier is simply an arbirary marker which entitles you to a bonus to which you would otherwise have no right.

You can't be fired for raising the issue with DLSE. You could become "persona non grata" in your industry, if you were to try to find new employment, once the "grapevine" finds out that you put your employer in the crosshairs of DLSE -- win or lose.

That's a risk that you have to weigh. Legally, I think you have a viable argument -- but, not a "slam dunk." I'm sure that the bank's legal department has considered some of these issues before signing off on the commission agreement. I'm not aware of any case law where this sort of issue was raised in a California or federal appellate court -- so, it's a crap shoot, in my opinion, because this issue is a question of California law, and even if something like it has arisen elsewhere in the USA, I doubt that it would be applicable, because California labor law is substantially different than that of practically every other U.S. jurisdiction.

I wish I could be more definitive, but the best I can do is to try to explain the legal theory, so that you can try to make an informed decision.

Once again, I don't see any argument concerning the difference in commission agreements between corporate divisions. A private employer can discriminate in wages, salary, commissions and benefits, except based upon race, color, ancestry, nationality, religion, sex, equal pay between sexes, sexual orientation, age or disability. So, unless you can connect your division's compensation package with one of the above-described class-based discriminatory factors, you won't gain any traction on this issue.

Hope this helps.

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