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LawTalk, Attorney
Category: California Employment Law
Satisfied Customers: 37855
Experience:  I have 30 years of experience in the practice of law, including employment law and discrimination law.
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Is a commission on a sale in California, refundable after one

Customer Question

Is a commission on a sale in California, refundable after one year? My customer requested a refund on his Power Train Warranty on his car after a year and the warranty company wants to take my commission that I "earned". In California, I believe "commission" and "wage" are synonomous. Do I have to refund my commission even though the warranty company has to offer a pro rated refund on the unused "mechanical" warranty?
Submitted: 4 years ago.
Category: California Employment Law
Expert:  LawTalk replied 4 years ago.

Good afternoon,

I'm Doug, and I'm very sorry to hear of your situation. My goal is to provide you with excellent service today. I empathize with the situation you are in. It is a typical case of David vs. Goliath, where a large company has a superior advantage and tries to make unfair use of that position. Whether you can win or not depends on the specific facts of your situation.

Under CA law, you are correct in that the state laws treat a commission the same as a wage due. However, it is legal for an employer to structure a commission plan such that a paid commission can because refundable in the event the employer chooses to make a refund to the customer.

If your commission plan does not specifically set that out, then the employer may not legally seek reimbursement of your former commission payment.

If it is not an employer that is seeking to recover the payment of a commission from a third party---like an insurance company who you happen to sell policies for as an independent contractor and 1099 recipient as opposed to a W-2 employee, then the contract between you and the third party would be controlling in any dispute over the ability to recover a paid commission, and the employment laws of CA would not be applicable. In this case you would have to consult with the agreement that you signed with the third party to determine your rights, and those of the third party in the event of a refund to a customer by the third party.

I understand that you may be disappointed by the Answer you received, as it was not particularly favorable to your situation. Had I been able to provide an Answer which might have given you a successful legal outcome, it would have been my pleasure to do so.

You may reply back to me using the Reply to Expert link if you have additional questions. Please understand that I have no control over the how the law impacts your particular situation.

Please remember to rate my service to you when our communication is completed.

I wish you the best in 2013,



Customer: replied 4 years ago.

I already gave a new credit card. I was trying to get back to you Doug but they opened a whole new case. I want to finish what we were discussing but also would like to convert to a 30 day trial account since I have some other issues pending. Tell me how to get back to you.


[email protected] (XXX) XXX-XXXX

Customer: replied 4 years ago.

Doug, I was hoping to get some "words"from you. I realize that Ca. Labor Law is more complex and unique that any other state. I've done a lot of reading in prep for my Small Claims Hearing. I read that the Warranty Co. that I represent cannot ask me to refund them my commission if it is used to offset their balance sheet. In other words, they cannot use my refund to compensate for their loss of having to pay the policy holder. The Warranty Co. is outside of Ca. and they reference different law that is not acceptable in CA. They mailed a check to me to reimburse the customer; then they fired me; and then they stopped payment on the check; to which I incurred penalties from my own bank. I'll have to find the exact wording, but like I said, if they are usng my refund to offset their loss, they cannot do this. Something to do with MY commission offsetting their loss by having to payback the unused porton of the mechanical warranty. This may be the ground that I'll stand on when I go to court. I was hoping to get some "words" from you to the effect that one year of the three year warranty contract had passed and therefore I am no longer liable for any payback. Then, on top of all this, they fire me and stop payment on the reimbursement check that I am to give the customer. Well if I'm no longer associated with the Warranty company, why should I have to any exposure to having to pay anything back. Since they fired me, then the full weight of the reimbursement of the Warranty should belong 100% to the Warranty Company. As I said, Wells Fargo charged me a penalty for this check that was "stopped payment" on. It appears from the brief
search that I've done, the best legal reference seems to be coming from State Labor Law since California is so strict. I was hoping that you might have some case law or case reference that I could point out to the judge as oppsed to me having to keep searching. I was fired by the VP of this company in Virginia. Can I sue him along with the company so that he has to come out here to testify. He's the only one that knows how this story came to fruition. Plus, if I can force him to have to come to California to appear, then he'll think twice about continuing the suit as opposed to just settling the $750. The way it stands, he's sending a local Region Manager in to appear who knows nothing about what the VP and I discussed; along with the bounced check; etc. Would it behoove me to visit the Calif. Labor Board and see if I can get some advice from them? Give me some "words" that I can use in court , Doug. Thank you.

Expert:  LawTalk replied 4 years ago.

Good morning,

I appreciate the fact that you are doing self research. However, you are mistaken as to the concept of an employer refunding your commission if it is used to offset their balance sheet. That is not a blanket law which applies in ALL circumstances. It applies to employee hourly wages or salary for losses the employee causes and it applies ONLY in an employee/employer relationship. It does not apply to employer commission programs in which the employee has agreed to such claw-backs as part of the commission program. Neither does it apply to situations where there is no employer-employee relationship.

An employer subject to CA law MAY establish a commission program that requires the employee to refund a commission if the customer is refunded their payment of that product which resulted in the commission. Here is a quote from a scholarly legal article, and the link to the page where you may find it:

"No chargebacks for commissions fully
– A commission chargeback may be unlawful where the
commission was fully earned at the time of a sale (that is, payment
was not an advance on commissions) and the employee has not agreed
in writing to the chargeback. However, an employee who receives both
wages and sales commissions may agree in writing to a chargeback
against commissions advanced by the employer if the sale did not
proceed (for example, the customer returns the merchandise).
However, 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.”


You refer to your relationship with the warranty company as an association. If you were not a W-2 employee of the warranty company---then absolutely NONE of the CA employment laws you are hoping to use in your favor apply to your situation. If you are nothing more than an independent contractor, and not a W-2 employee, then there is nothing to your relationship with the warranty company than your contract with them.

That is what I was trying to get across in my answer yesterday.

Answer me a single, straightforward question, if you would please.

Were you, a W-2 employee of this warranty company, or not?


Expert:  LawTalk replied 4 years ago.
Good evening,

I wanted to thank you for using JustAnswer, and to inquire whether my answer to you was helpful to your understanding of the law, as regards your question.

Is there anything else that I can assist you with, please feel free to ask. If you do not require further legal information at this time, please feel free to bookmark my profile so you can request me when you do have another question. Here is a link to my profile:

Thank you very much and take care.