Many people call my office to discuss their "commission" problems
when they're not talking about a commission but rather a discretionary
payment. Under California law, commissions are compensation paid
based on the value of the employee's sale of a good or service,
such as 1% of the total value of the sale. As one California case
states, commissions are compensation "paid to any person for
services rendered in the sale of such employer's property or services
and based proportionately upon the amount of value thereof."
Similarly, there are compensation plans that reward employees
based on certain standards of employee performance. For example,
in the mortgage industry, some compensation plans reward employees
for types of loans and the number of loans in a specific period.
Under California case law, they are not technically commissions,
but payment is mandatory.
In these examples, the employer promised to pay the employee if
the employee can make the sale or fulfill the agreed upon conditions.
The promise may be in a written contract, a compensation plan given
to the employee, or even just a spoken agreement. Once the parties
make the agreement made and the employee fulfills the appropriate
condition, the employer must pay the commission. On the other hand,
discretionary bonuses cannot be enforced in court. The classic
examples are Christmas bonuses and year-end bonuses. In these circumstances,
the employer has made no promise to the employees and has no criteria
for setting these bonuses. Rather, the employer assesses the employee's
performance after the work has been performed and makes the decision
of if and how to compensate the employee. Simply put, if there
is no mandatory obligation to pay the commission, then the commission
cannot be enforced in court. Of course, it is the lawyer's role
to look for that obligation in the company's papers and the circumstances
of the case.
<
Back :: Forward >
