Some jobs are paid by commission instead of hourly wage or salary. Generally, commission payment is for sales and marketing jobs, to compensate the worker for each sale or new customer brought to the company. Under the right conditions, a good salesperson can make more money through commission payment than if they were paid a salary. However, many employers use the promise of commission payment as a way to underpay workers or pay less than the minimum wage.
A commission may be paid in addition to a salary or instead of a salary. However, under the Fair Labor Standards Act (FLSA) and California employment law, an employer using commission payment cannot pay less than the minimum wage. If the employee’s commission pay is less than the minimum wage (based on hours worked and compensation), then the employer is generally required to make up the difference to pay at least minimum wage.
At Sirmabekian Law Firm, our specialized employment attorneys will help employees get the rightful wages they are owed. We recognize all the tactics used by employers to try to reduce commission or pay less than the minimum wage. With the law by our side, we will use our experience and know-how to help you resolve your commission and wage theft issues. You deserve to be paid for the work you do and nothing less.
To better understand what commission payment means and what you can do about your employer’s failure to pay fair wages and commissions in Los Angeles, we answer some of the most common questions, including:
- What are the types of commission pay?
- What if my commission is less than the minimum wage?
- What can I do if my employer is not paying my full commission pay?
- Can my employer take away part of my commission?
- Can the employer pay less commission if I am an independent contractor?
- What are my commission payment rights as an employee in Los Angeles?
- Can I be fired for asking about my commission payments?
- Do you need an employment attorney to represent your wage and commission claim in Los Angeles?
This page provides an overview of commission and wage requirements and links to pages to relevant employment law topics. If you still have questions after reviewing these pages, contact our office to schedule a free and confidential consultation.
Commissions are wage payments generally based on sales. Commissions may be based on the number of sales or number of sales. Commissions are not discretionary payments but are wages owed for work done, like a salary.
There are a number of commission payment standards and compensation plans. Commission payment options include:
- Straight Commission
- Salary Plus Commission
- Draw Against Commission
- Residual Commission
- Variable Commission
- Group Incentives
With straight commission, the employee earns their entire pay based on sales. The rate of commission and percentage of commission will depend on the individual’s employment agreement with the employer. An employer may provide the same commission base for each employee or have different commission rates for individual employees.
Base salary plus commission is one of the most common payment options that include commission. This provides a base salary in addition to a commission based on sales. This type of sales agreement provides a minimum amount of pay for times when sales are low. In some cases, an employer may set the base salary below the minimum wage amount but when the commission plus salary is below the minimum wage, the employer needs to bring the pay up to the minimum wage.
Draw against commission generally provides a predetermined draw amount, which they need to pay back at the end of the pay period. Anything earned above the draw, the employee keeps as salary.
The variable commission is generally based on volume. For example, an employer may pay 4% on sales up to $10,000, 5% on sales between $10,000 and $15,000, and 6% for sales above $15,000. Variable commission can also go in the opposite direction, reducing compensation at higher rates.
Some payments from an employer that are based on sales are not commissions but instead are discretionary payments. It is important to review your employment contract and commission agreement to understand your specific commission rates and what your employer is required to pay. Talk to your California employment lawyer for help if your employer is not paying you what they should.
If an employer is paying less than the minimum wage based on compensation per hour worked, then the employer is violating California’s wage and hour laws.
There are a federal minimum wage, a state minimum wage, and even some county and city minimum wage rates. When an employee is subject to state and local standards, the higher minimum generally applies. For example, an employee working in the City of Los Angeles has to be paid the city minimum wage even if the state minimum wage is lower.
CALIFORNIA MINIMUM WAGE
As of January 1, 2020, the rate of minimum wage in California is:
- $12.00 for an hour of work for employers with less than 25 employees, and
- $13.00 for an hour of work for employers with more than 26 employees.
The rate is scheduled to increase by $1.00 for each group, each year until all employers have a minimum wage of $15.00 per hour.
LOS ANGELES COUNTY MINIMUM WAGE
In unincorporated areas of Los Angeles County, the rate of minimum wage is:
- As of July 1, 2019: $14.25 per hour of work, and
- As of July 1, 2020: $15.00 per hour of work.
LOS ANGELES CITY MINIMUM WAGE
The City of Los Angeles has a separate minimum wage standard. For the City of Los Angeles, the rate of minimum wage is:
- As of July 1, 2019: $14.25 for an hour of work for employers with more than 26 or more employees (and $13.25 for employers with 25 or fewer employees),
- As of July 1, 2020: $15.00 for an hour of work for employers with more than 26 or more employees (and $14.25 for employers with 25 or fewer employees), and
- As of July 1, 2021: $15.00 per hour for all employers.
An employer who is not paying full commission payment may be violating state and federal labor laws. Your options for being underpaid may depend on what your employer is doing. If your commission and salary are less than the minimum wage, you may be able to file a wage and hour violation lawsuit against the employer. If you are being paid above the minimum wage but your employer is not paying the commission agreed upon, you may have a contract claim against your employer.
NOT PAYING MINIMUM WAGE INCLUDING COMMISSION
If your employer is not paying you the minimum wage for your current pay period, you can contact an experienced Los Angeles employment lawyer to file a wage and hour lawsuit. Your employer may try and make excuses for not paying the minimum.
- “You signed this salary agreement, so you can’t ask for more than we agreed to.”
It does not matter if you agreed to a pay rate that is less than the minimum wage. You cannot agree to a rate that is paid less than the minimum wage. Even if you agreed to a payment that would be less than the minimum wage, your employer is still required by law to pay the minimum wage.
- “You made a lot of money last month, so that evens out to lower pay this month.”
It does not matter if you had a great sales record last month or even over the last year. Your employer is still required to pay the minimum wage during your current pay period. Even if you made the equivalent of $100 per hour during the prior pay period, you are still required to be paid the minimum wage for the next pay period. A slow sales month does not excuse the requirement to pay the minimum wage.
NOT PAYING AGREED COMMISSION RATE
If your employer agreed to a 6% commission, that is the amount your employer should pay. If you have a great sales record, the employer may try and reduce your commission, but the employer cannot generally change the commission rate for sales already made. A claim for failure to pay commission may depend on the commission agreement.
Some employers will try and reduce the commission after a certain amount of commission has been generated. For example, the employer may say that the salesperson made more sales than expected and will only pay 5% commission instead of the agreed-upon 6% rate. The employer cannot generally make retroactive payment changes.
An employer may be able to make changes going forward, like reducing the commission rate to 5% on all further sales. It is up to the employee whether or not they want to agree to this new arrangement.
Another way an employer may try and get out of paying the agreed compensation is by taking away the hourly salary. The employer may claim that the commission is large enough that the employee does not need the hourly salary that was part of the commission agreement.
For example, a salesperson is paid $15.00 per hour plus a 2% commission on sales. The salesperson generates $2,000 per 40-hour week in commissions alone. The employer pays the salesperson $2,000 but does not include $600 in hourly wages. The employer cannot generally take away agreed compensation after the fact.
If your employer is not paying an amount agreed to in your employment contract, you may have a contract claim against the employer. Talk to your employment lawyer about your employment contract to make sure your employer is not taking advantage of you, and you get the compensation you deserve.
Some employers try and use commission as a disciplinary tool. For example, if an employee comes in late or fails to show up for a shift, an employer may say that they are taking away their commissions for the month to teach them a lesson. Taking away part of a commission may be a breach of the employment agreement.
An employer may be able to restrict, reduce, or change some discretionary payment, like a bonus or team incentives. However, an employer cannot generally reduce compensation for sales completed or work completed. If your employer is using sales commissions as a way to discipline workers or arbitrarily pay employees in violation of the compensation agreement, talk to your Los Angeles employment attorney about your options.
Employers may try and hide reduced commissions, without telling the worker about paying less than the amount owed. Some ways an employer may try and reduce commission compensation include:
- Delaying payments,
- Spreading out commission payments over multiple pay periods,
- Lack of paperwork or documentation about commissions and sales,
- Using complicated (or arbitrary) formulas to determine commissions, or
- Nonpayment on termination of employment.
Independent contractors can differ, as they are not subjected to the same hour and wages protections as employees. Using independent contractors is also a way for employers to avoid workers’ benefits, compensation insurance, and employment taxes. Unfortunately for many workers, employers have to tendency to misclassify employees as independent contractors.
In California, whether a worker is an independent contractor or an employee can be resolved, based on the ABC test. Under the ABC test, a worker is considered an independent contractor if the following conditions are met:
- In connection with the performance of the work, the worker is unconfined from the direction and control of the hiring entity, with both under the contract for the performance of the work and in fact;
- The worker performs their work that is outside the usual course of the hiring entity’s business; and
- The worker is generally engaged in an independently established occupation, trade, or business of the same nature as that involved in the work performed
If you are an independent contractor working on a commission-based payment for a business, the business or employer may not have to pay the overtime or minimum wage. However, a business may have held an agreement with an independent contractor over the commission agreement.
An independent contractor may have a breach of contract claim against the business if a business pays less than the agreed commission payment. By filing a lawsuit against the business, it can allow the contractor to get the money owed and prevent the business from profiting from unlawful actions.
As an employee in Los Angeles, you are generally protected by wage and hour payment laws, overtime laws, minimum wage laws, and contract agreements. If your employer is violating wage and hour laws (such as paying less than the minimum wage or not paying overtime rates), then you may be able to file a wage and hour violation claim against the employer.
In a wage violation claim, the employee may be able to recover more than just the lost commission or unpaid wages. In a lawsuit for unpaid wages, the worker may be able to recover
- Amount of wages or compensation owed;
- Interest on any unpaid compensation;
- Civil penalties; and
- Reasonable attorney’s fees.
If your employer is not paying an amount agreed to as part of an employment contract, commission agreement, or even under a verbal agreement, you may be able to file a breach of contract claim against the employer.
CLASS ACTION UNPAID COMMISSION CLAIMS IN CALIFORNIA
When an employer is violating California labor laws against one employee, they may be doing the same against other employees. An illegal or unfair commission compensation policy may end up impacting multiple workers, including past employees. In this situation, the employees may be able to file a class-action lawsuit against the employer.
A class action is a type of lawsuit that allows multiple people with similar complaints against the same employer to come together and assert their rights under California Labor Laws and federal employment laws, such as the Fair Labor Standards Act.
A class-action lawsuit is a way to hold the employer responsible for a number of smaller violations that, individually, do not amount to very much money. However, combined with many similar violations, the number of damages may be enough to make the employer take California labor laws more seriously.
In a class action claim, the resulting damages awarded are divided among the group and their representatives. Often, a greater percentage of the settlement goes to the person who initiated the suit. Talk to your Los Angeles employment attorney if you suspect your employer is failing to fairly compensate multiple employees. Our class action attorneys accept qualified cases on a contingency fee basis, so employees pay our employment law firm only when we win money for them.
Employment in California is “at-will.” This means an employer can fire you for almost any reason or no reason at all. Similarly, as an employee, you can leave a job whenever you want. However, California labor laws provide protections for employees who are fired for an illegal reason, like discrimination or asserting their labor law rights.
Some employees do not want to push back against the employer to get the money they are owed because they are worried about losing their job. The California Labor Code protects employees who file a complaint with the Labor Commissioner or threaten to file a lawsuit for wage and hour violations. Under California Labor Code 98.6, an employer shall not discharge an employee, or in any manner discriminate, retaliate, or take adverse action against an employee for asserting their rights to demand payment of wages due.
If you suspect your employer is not paying your full compensation, reducing commissions, or failing to pay the minimum wage or overtime, do not just sit back and accept it. If you have any concerns that your employer may retaliate against you for your commission claim, you can talk to an experienced employment attorney about your options.
Contact Sirmabekian Law Firm online or at 818-473-5003 to schedule an appointment to speak with an attorney who has the skills and experience to help make sure you get the best outcome for your unpaid expenses case. An initial consultation will not cost you anything and you will be able to get an idea about your rights and options to move forward with your wage or commission claim.
Get A Free Case Evaluation
We are here to help you with law questions