Bonuses & Commissions

Protecting the Incentive Pay You Earned

When your pay includes commissions or bonuses, the details of the pay plan matter. California has specific rules for how commissions must be documented and paid, and when an employer withholds incentive pay you earned, the amount in dispute can be substantial.

If your employer refused to pay a commission you earned, changed the rules after the fact, or clawed back incentive pay, your rights may have been violated.

Commissions Must Be in Writing

Under Labor Code section 2751, an employer whose employees are paid commissions must provide a written commission agreement that explains how commissions are calculated and paid. The employer must give the employee a signed copy and keep a signed receipt. Failing to put a commission plan in writing is itself unlawful.

When a Commission Is Earned

Once you meet the conditions set out in the commission agreement, the commission is earned and the employer must pay it. An employer cannot rewrite the deal after you have done the work, and ambiguities in a poorly drafted plan are generally construed in the employee’s favor. A commission you have already earned generally cannot be forfeited simply because you later leave or are terminated, though the outcome depends on the specific terms of the plan.

Discretionary and Nondiscretionary Bonuses

Not every bonus is enforceable. A truly discretionary bonus, where the employer decides after the fact whether and how much to pay, with no promise and no set criteria, generally cannot be enforced in court. A holiday bonus is the classic example. A nondiscretionary bonus is different. When a bonus is regularly paid, promised or tied to measurable goals such as production, sales, or hours worked, it is earned once you meet the conditions and must be paid. Our attorneys evaluate bonus pay by looking carefully at the company’s plan documents and in how the bonus was actually handled.

Bonuses, Commissions, and Overtime

Nondiscretionary bonuses and commissions also affect overtime. These earnings must be included in the regular rate of pay used to calculate overtime, so leaving them out underpays every overtime hour. This is a common and easily overlooked violation, and it is covered further on our Overtime Pay page.

What You Can Recover

If your employer withheld commissions or bonuses you earned, you may be able to recover the unpaid amounts plus interest. Depending on the facts, you may also be entitled to waiting time penalties when the pay is still owed after you leave the job, an overtime adjustment where incentive pay was left out of the regular rate, and your attorney’s fees and costs.

Deadlines depend on the theory of the claim, and some claims based on a written agreement allow up to four years. Because the terms of the plan drive the analysis, it is best to have an attorney review your agreement and pay records early.

Frequently Asked Questions

Does my commission plan have to be in writing?

Yes. Labor Code section 2751 requires employers to give employees a written commission agreement that explains how commissions are calculated and paid, along with a signed copy. Not having a written plan is itself a violation.

Can my employer refuse to pay a commission I already earned?

No. Once you satisfy the conditions in the commission agreement, the commission is earned and must be paid. Employers cannot change the terms after you have done the work, and unclear language is generally read in your favor.

Can I lose my commission if I quit or am fired?

Usually not for commissions you already earned. Whether pay tied to events after you leave is owed depends on the specific terms of the plan, which is why it is worth having an attorney review the agreement.

Is a holiday or discretionary bonus enforceable?

Generally no. A bonus the employer decides on after the fact, with no promise or set criteria, can be deemed discretionary and may not be enforceable. A customary or regularly paid bonus promised or tied to goals like sales or production is nondiscretionary and must be paid once earned.

Do commissions and bonuses count toward my overtime?

Nondiscretionary bonuses and commissions must be included in the regular rate used to calculate overtime. If your employer left them out, your overtime was underpaid.

Schedule Your Free Consultation

At Righetti Law in San Francisco, our attorneys represent employees in California state and federal courts and have decades of experience handling wage-and-hour and class action matters. We have recovered millions for our clients in court and in settlement.

Your consultation will be confidential, and we will not contact your employer.

Call our firm at 415-983-0900 for a complimentary, confidential consultation. You may also complete our online contact form.