Sales Executive Commission and Clawback Lawyer

Closing the biggest deal of your career should not be the reason you lose your job, or your commission. If your employer changed your plan, reassigned your accounts, clawed back commissions or let you go before a large deal paid out, California law may entitle you to what you earned, plus penalties and attorney’s fees.

On this page: Common situations · California commission law · Retaliation · What to do now · FAQ

Smith Trial Group represents enterprise account executives, sales directors, VPs of sales, chief revenue officers, and business development leaders in Orange County, Los Angeles and across Southern California. Attorney Cardon Smith spent years representing Fortune 500 companies in business litigation and served as a law clerk to a federal judge, so he knows how companies draft and defend commission plans.

Situations We See

• Terminated shortly before a large deal closed, invoiced or was paid
• A commission plan changed mid-year to reduce payouts on deals already in the pipeline
• Accounts or territories reassigned after you landed or developed them
• Commissions clawed back after you resigned or were terminated
• “Windfall,” cap or discretion clauses invoked to cut a large payout
• Accelerators or SPIFs not paid, or commissions left out of your final pay
• A commission promise that was never put in writing

How California Commission Law Works

• Written plan required. Labor Code section 2751 requires commission agreements with California employees to be in writing, to set out how commissions are computed and paid, and to be given to the employee, who signs a receipt.
• Earned commissions are wages. Once a commission is earned under the plan’s terms, it is a wage protected by the Labor Code. When a commission is “earned” depends on how the plan defines it, which is why the wording matters.
• No taking back earned wages. Employers generally may not recoup wages already earned. Courts have allowed chargebacks of commission advances when the plan clearly defines when commissions are earned, so the distinction between an advance and an earned commission is often the central issue.
• Final pay. Wages are due immediately on termination, and within 72 hours if you quit without notice. Willful failure to pay earned wages on time can trigger waiting-time penalties of up to 30 days’ pay, which for a high earner can be substantial.
• Fees and interest. Employees who win claims for unpaid wages can recover attorney’s fees and interest.
• Deadlines. Claims under the Labor Code are generally subject to a three-year statute of limitations, and claims on a written contract to four years. Earlier action is better.

Discretionary bonuses are treated differently from commissions, but a bonus that is earned under objective criteria can also be a wage. See our final paycheck guide.

Retaliation and Termination to Avoid Paying

California law prohibits retaliation against employees who complain about unpaid wages, including commissions. A termination timed to avoid paying a commission, or in retaliation for asking about one, can support claims for retaliation and wrongful termination in addition to the unpaid commission. Sales leaders who are pushed out after raising concerns about improper revenue recognition or customer billing may also have whistleblower claims. See finance whistleblower protections and workplace retaliation.

Most employee non-competes are void in California, so a commission dispute usually does not have to end your ability to work in your industry. See non-competes and trade secrets.

What to Do Now

• Keep copies of every commission plan, quota letter, territory assignment and plan acknowledgment you signed.
• Keep your own record of deals, dates, deal credit emails and commission statements. Do not take confidential customer lists or data.
• Write down when you asked about a missing commission and how the company responded.
• Have any separation agreement reviewed before you sign. A release can waive unpaid commission claims for disputed amounts.

Frequently Asked Questions

Are commissions wages in California?

Yes. Once a commission is earned under the plan’s terms, it is a wage protected by the California Labor Code, including the rules on timely final pay.

I was fired before a big deal paid. Do I get the commission?

It depends on when the plan says a commission is earned. If you completed what the plan requires, the commission is generally owed even after termination. A firing timed to avoid paying can also support a retaliation or wrongful termination claim.

Can my employer change my commission plan mid-year?

Employers can generally change plans going forward with notice, but they cannot reduce commissions already earned. Changes aimed at deals already closed or nearly closed are often challenged.

Can my employer claw back commissions after I leave?

Only in limited circumstances. Employers generally cannot take back earned wages. Chargebacks of advances may be allowed if the written plan clearly defines when commissions are earned.

What penalties apply if final commissions are paid late?

If an employer willfully fails to pay earned wages on time at the end of employment, waiting-time penalties of up to 30 days’ wages can apply, plus interest and attorney’s fees.

How long do I have to bring a commission claim?

Generally three years for Labor Code wage claims and four years for claims on a written contract. Some related claims have shorter deadlines, so get advice early.