Legal Question in Employment Law in California

My company employs various regional sales reps in multiple states across America but is based in Tennessee. Last year they changed our commission plan to one where they pay out the commission quarterly, but withheld 20% of the commission (from that quarter) that would then be paid when the fourth quarter commissions are paid (January) if certain targets or goals were met. Many reps are due somewhere between 10K and 20K, with some maybe even a little more. We were just recently told that the board (investors) decided they were not going to pay these commissions out due to the fact that we lost money last year and they don't want to pay out large commissions if it wasn't what they deemed a successful year. Our company has 4 divisions total and our division is the one carrying the other 3. Is this legal what they've done. The comp plan is in writing and the metrics have been clearly stated. Also, does it matter for this legal issue what state each of us is in, or do we revert to the company's home state (Tennessee)? What's the best way to pursue this if it's not legal and not put our jobs at risk


Asked on 2/02/11, 10:42 pm

1 Answer from Attorneys
Michael Kirschbaum Law Offices of Michael R. Kirschbaum

Commissions are based on contract. The terms of the contract should state when commissions are earned and how they are paid. Under California law, once commissions are earned, they cannot be forfeited.

It is impossible to render a legal opinion on your specific claim without reading the commission plan and knowing all of the relevant facts. But, generally speaking, employers cannot change the terms of the contract retroactively.

Many employers will state, in employment contracts, which state law applies in the event of a legal dispute. If the law of Tennessee applies, and you are involved in interstate commerce, it is very likely California state courts would not have jurisdiction over your claim. But you may be able to file a lawsuit in federal court. If many sales people are affected, you may even be able to file a class action lawsuit.

You should consult with experienced employment law attorneys in your area, to review the contract and explore your options.

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Answered on 2/08/11, 4:09 pm


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