Legal Question in Business Law in California

Re: Commission Only & Decelerators

You are asking a complicated legal question that requires more facts to be answered correctly.

The first question I have is whether the employer is allowed under the CA labor code to pay commission-only.

CA law defines commissions as: "compensation paid to any person for services rendered in the sale of such employer's property or services and based proportionately upon the amount or value thereof." This means that commission pay is legal in CA only if (1) it is for the sale of a product or service -- not the making of a product, or the actual service (e.g., a mechanic cannot be paid on commission basis,) and (2) the pay must be tied to the amount of sale. This is important, because if you are working more than 8 hours in a day or 40 in a week, you may be entitled to overtime pay. (Any week that your pay is not 1.5 times the minimum wage, you would also be entitled to o.t. pay.)

As for the tiered decelerator -- it depends on how it is written. An employer is prohibited from making deductions for business losses -- the exact language of the plan, and how it is implemented would have to be looked at.

Finally, if the plan is legal, it can only be applied going forward, and cannot be used for sales that have occurred in the past (even if commission from those sales is paid after the change in pay plan. . . )

Feel free to send more facts to my email:

[email protected].

Good luck.

Re: Commission Only & Decelerators

This can't be done retroactively, but I would think in most situations it would be legally permissible for future periods upon some notice, and it wouldn't necessarily have to be as long as a month.

The issues would boil down to whether the employment was "at will" or not; most California employment is "at will," meaning the employee is free to quit on short or no notice, and the employer is free to fire on short or no notice. There are many exceptions, but these are due to the existence of an express or implied contract altering the basic "at will" nature of the employment.

If the employment is "at will," the law would look at the change in the commission structure as the employer telling the employee, "OK, you're fired, but I'll hire you back on the following terms: ...... (new commission schedule)"

There is a sprinkling of special situations and legal theories that mitigate the harsh impacts of this basic set of principles, but unless your lawyer and you can find an exception that fits, such as an implied promise of no discharge except for cause, you have the choice of accepting the new terms or finding another job.