San Diego, California, Commission Sales Employees Lawyers

How Does Commission Pay Work?

Employers must pay at least minimum wage for all hours worked by commission sales employees. It is not permissible for an employer in California to “average” pay earned from commission sales over the course of the day to cover the minimum wage obligation for uncompensated hours. This time must be separately compensated.

For example, department store commission employees, furniture sales employees and other retail sales employees who perform duties outside of their commissionable time for mandatory meetings, paperwork, etc., must be paid at least minimum wage for this time. Commissioned sales employees can include:

• Retail
• Mortgage
• Insurance
• Securities
• Automobile
• Sales representatives
• Inside and outside sales in real estate

Rest Periods

In addition, employees paid by commission must be separately paid for 10-minute rest periods. Every nonexempt employee is entitled to a paid 10-minute rest period for every four hours or major fraction worked. Since employees working by commission do not receive compensation for rest period, employers must pay this time at the employee’s regular rate of pay.

Unreimbursed Expenses

Commission sales employees must be reimbursed for all expenses and may not have commissions reduced for training costs, seminar costs, telephone charges, mailing costs, postage, subscriptions, office supplies, office equipment, wages of the support staff, costs associated with transaction errors, costs to settle disputes with customers and other necessary business-related costs or expenses that result from their employment.

Some examples of covered expenses include:

• Training costs
• Seminar costs
• Telephone charges
• Mailing costs
• Postage
• Subscriptions
• Office supplies
• Mileage
• Cellphone
• Advertising
• Business development
• Business lunches
• Office equipment
• Wages of the support staff
• Costs associated with transaction errors
• Costs to settle disputes with customers
• Other necessary business-related costs or expenses that resulted from your employment

Unpaid Overtime

Inside sales commission employees are entitled to overtime if their regular rate of pay does not exceed one and one-half times the applicable minimum wage for every overtime hour, and they do not earn more than half their weekly income from bona fide commissions.

Employees who perform outside sales work are owed overtime if they spend less than 50% of their time engaged in actual outside sales and related activity. Outside sales does not include sales made by mail, telephone or the Internet, unless such contact is used merely as an adjunct to in-person sales visits with clients.

Thus, any fixed site, whether home or office, used by a salesperson as a headquarters or for telephonic solicitation of sales is considered one of the employer’s places of business, even though the employer is not in any formal sense the owner or tenant of the property and does not constitute time engaged in outside sales. Sales that originate by telephone generally do not qualify as outside sales.

Is An Employer Required To Provide A Written Commission Contract In California?

Yes, California law requires employers to put commission agreements in writing and provide a signed copy to the employee. The contract must explain how commissions are calculated and when they are earned. If your employer has not done this, they may already be in violation.

Can My Employer Deduct Business Expenses Or Returned Items From My Commissions?

California law bars employers from deducting general operating expenses from your wages, but employers may legally deduct or adjust commissions for returned merchandise if your signed written commission agreement clearly defines commissions as unearned or subject to chargebacks upon return of specific sales.

Do Commission-Based Employees In California Get Paid For Rest Breaks And Nonsales Work?

Yes, they should compensate you independently for paid rest periods and time spent on non-sales activities from commission earnings. California law does not allow employers to use your commission pay as a credit toward these obligations. If they do not pay you separately for this time, your employer may owe you additional wages.

How Do I Know If I Am Eligible For Overtime Pay As A Commission Sales Employee?

Your eligibility depends on whether you are an inside or outside sales employee and your pay structure. Inside sales employees are entitled to overtime pay unless an employer proves they meet the commissioned sales exemption, which requires that over half their earnings come from commissions and their total pay exceeds one and one-half times the minimum wage.

What Happens To My Unpaid, Earned Commissions If My Employer Terminates Me Or I Leave My Job?

Earned commissions count as wages under California law. They should pay you this upon your separation from employment. Employers who withhold them may face waiting time penalties and legal liability. Your right to collect unpaid commissions does not disappear when your employment ends.

Start The Conversation Today

Working in commission sales can be rewarding, but it also comes with legal rights that many employees simply overlook. If an employer has violated your commission pay rights, our attorneys are ready to stand by your side and fight for what you deserve. Contact our firm today at 844-403-3569 to schedule a consultation and take the first step forward.