Unpaid Commissions and Bonuses in California: What You Are Owed

In California, commissions and non-discretionary bonuses you have earned are wages, and your employer must pay them in full and on time, including after you quit or are fired. California also requires every commission plan to be in writing, signed, and clear about how commissions are calculated and paid (Labor Code 2751).

The money at stake is often large. A single unpaid 5% commission on a $200,000 deal is $10,000. If your employer willfully holds back earned commissions when you leave, it can also owe waiting-time penalties of up to 30 days of your pay, plus interest and attorney’s fees.

This guide covers when commissions and bonuses count as wages, what a California commission agreement must say, when a commission is “earned,” the rules on chargebacks and clawbacks, how bonuses affect your overtime rate, final pay rules, and what to do about an unpaid commission in California.

Commissions and bonuses are wages in California

California defines “wages” broadly. Under Labor Code 200, wages include all amounts for labor performed, whether the amount is fixed by time, task, piece, commission basis or any other method. Labor Code 204.1 defines commission wages as compensation paid for services in selling the employer’s property or services, based proportionately on the amount or value of the sales.

Bonuses fall into two groups:

• Non-discretionary bonuses are promised in advance or tied to a formula: hitting a sales target, production numbers, attendance, safety records, or a retention date. Once you meet the conditions, they are earned wages.
• Discretionary bonuses are true gifts: the employer decides whether to pay and how much, without promising them in advance. These are generally not enforceable.

Calling a bonus “discretionary” in a handbook does not settle the question. If the bonus was announced in advance, calculated by a formula, or paid so regularly that employees expect it, it may be non-discretionary in practice. That distinction matters both for whether you can sue to collect it and for how your overtime must be calculated.

Key fact

Labor Code 2751: your commission plan must be in writing

When an employer hires someone to work in California and the pay involves commissions, Labor Code 2751 requires:

• A written contract that sets out the method by which commissions will be computed and paid.
• A signed copy given to every employee covered by it, with the employer obtaining a signed receipt.
• If the contract expires and you keep working, its terms are presumed to remain in effect until a new agreement replaces it or employment ends.

The statute does not apply to short-term productivity bonuses such as those paid to retail clerks, or to temporary incentive payments that only increase pay under the written plan. Bonus and profit-sharing plans are excluded unless the employer offered to pay a fixed percentage of sales or profits as compensation for work.

A good commission plan answers these questions in plain terms: the rates, what counts as a sale, when a commission is earned, when it is paid, how splits and house accounts work, when chargebacks apply, and what happens if you leave. If your employer never gave you a written plan, you can still recover commissions you earned. The absence of a plan usually means the employer has a harder time proving any condition it now relies on, and unclear terms in a contract are generally read against the party that wrote them (Civil Code 1654).

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When is a commission “earned”?

California lets the employer and employee decide, in the plan, the moment a commission is earned. Common triggers include signing the contract, booking the order, shipping the product, the customer paying, or the customer staying past a trial period. Until the conditions in the plan are satisfied, a payment can lawfully be treated as an advance.

A few rules protect you:

• Earned commissions can’t be taken away. Once the plan’s conditions are met, the commission is a wage that must be paid.
• Changes generally work going forward. An employer can usually change a commission plan for future sales with notice, but it generally cannot rewrite the terms to cut commissions you already earned.
• Bad-faith timing can be challenged. If an employer fires you right before a large commission becomes payable in order to avoid paying it, that conduct may support a claim.

💡 Example: Marco earns a 5% commission on sales, and his written plan says a commission is earned when the customer pays. He closes a $200,000 deal, then resigns two weeks later. The customer pays three weeks after Marco leaves. Marco’s $10,000 commission ($200,000 x 5%) became earned when the customer paid, so it is owed then, even though he no longer works there.

Advances, chargebacks and clawbacks

Many sales jobs pay advances or draws and later “charge back” amounts if a sale falls through. California allows this only within limits. In Steinhebel v. Los Angeles Times Communications (2005), the court upheld a plan in which commissions were advances until the customer kept the subscription for a set period, because the written plan clearly said the commission was not earned until then.

Once a commission is earned, however, Labor Code 221 makes it unlawful for an employer to collect back any part of wages paid. Employers also cannot shift their ordinary business losses onto workers. In Hudgins v. Neiman Marcus Group (1995), deducting unidentified merchandise returns from salespeople’s commissions violated California law.

Situation	General rule	Law
Plan clearly says commission is an advance until the customer pays or stays	Chargeback before that point may be lawful	Steinhebel (2005)
Commission fully earned under the plan, then customer cancels	Employer generally can’t take it back	Labor Code 221
Returns or losses not tied to your sale deducted from your pay	Generally unlawful	Hudgins (1995)
No written plan or unclear terms	Commission still owed; ambiguities read against the employer	Labor Code 2751; Civil Code 1654
Employer changes plan mid-year	Generally applies only to future sales	Contract law

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Bonuses and your overtime rate

Non-discretionary bonuses and commissions must be included in your “regular rate of pay” when your employer calculates overtime. Many employers pay overtime at 1.5 times the base hourly rate only, which underpays every overtime hour in a week when a bonus or commission was earned.

In Alvarado v. Dart Container Corp. (2018), the California Supreme Court held that for a flat-sum bonus, such as a fixed attendance or shift bonus, the employer must divide the bonus by the non-overtime hours actually worked, not total hours, and then pay 1.5 times that amount for each overtime hour. Other types of bonuses and commissions are generally spread across all hours worked in the period they were earned.

💡 Example: Jen earns $20 an hour and works five 10-hour days, so she has 40 regular hours and 10 daily overtime hours. She earns a $100 flat attendance bonus that week. Under Alvarado, the bonus adds $2.50 an hour ($100 / 40 regular hours). Her overtime rate must increase by $3.75 ($2.50 x 1.5), so she is owed an extra $37.50 for the week ($3.75 x 10 hours) on top of the bonus itself.

Errors like this repeat every pay period and often affect everyone who receives the same bonus, which is why regular rate violations are a common basis for class and PAGA claims.

By the numbers30 days

Commissions and bonuses in your final paycheck

If you are fired, all earned wages are due immediately; if you quit, they are due on your last day with 72 hours’ notice, or within 72 hours without notice (Labor Code 201 and 202). Commissions and bonuses that are earned and can be calculated when you leave belong in that final paycheck. If the plan makes a commission payable only after an event that happens later, such as the customer paying, it is due when that event occurs.

An employer cannot forfeit commissions you already earned just because you resigned or were let go. If it willfully fails to pay, Labor Code 203 adds a waiting-time penalty of one day’s wages for each day of delay, up to 30 days. Our guide to the California final paycheck law explains how that penalty is calculated.

Bonuses can be more complicated. Some plans lawfully require you to be employed on the payout date, but a bonus that was fully earned before you left, under the plan’s own terms, is generally owed. Read the plan closely and get advice before accepting a reduced payout.

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The commissioned inside sales exemption

Some commission earners are exempt from overtime. Under Wage Orders 4 and 7, an inside salesperson is exempt from overtime only if, in each pay period, (1) their earnings exceed 1.5 times the minimum wage for every hour worked (at least $25.35 an hour in 2026, based on the $16.90 state minimum wage), and (2) more than half of their total pay is commissions.

Both conditions are applied strictly. The pay must be true commissions for selling, not bonuses for production or service work. And in Peabody v. Time Warner Cable (2014), the California Supreme Court held that an employer cannot reassign commissions paid in one pay period to other pay periods to meet the test. If you fail either condition in a pay period, you are owed overtime for that period. Exempt or not, you are still entitled to minimum wage protections and meal and rest breaks.

Outside salespeople, who spend more than half their working time away from the employer’s place of business selling, are exempt from most wage and hour rules, but they are still owed every commission they earn.

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What to do about an unpaid commission in California

1. Get the plan. Find every version of your commission or bonus plan, and the signed copy you were supposed to receive. Under Labor Code 432 you are entitled to a copy of any document you signed related to your job.
2. Save your sales records. Keep copies of your own deals, quotes, invoices, CRM reports and commission statements that you lawfully have access to.
3. Do the math. List each sale, the rate, the date earned and what you were paid.
4. Request your payroll records. See our guide to requesting your personnel file and payroll records.
5. Put your demand in writing. Send a short, factual email asking for the specific commissions owed.
6. Don’t sign a release. A separation agreement may waive commission claims; get it reviewed first.
7. Watch the deadlines. Statutory wage claims generally must be filed within three years (Code of Civil Procedure 338), a claim on a written contract within four years (CCP 337), and restitution under the Unfair Competition Law can reach back four years.

You can file with the Labor Commissioner or hire an attorney. Our guide to a Labor Commissioner wage claim vs. a lawyer explains which fits large commission disputes.

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Unpaid commissions are often the tip of the iceberg

Commission disputes rarely stand alone. When we review a commission case, we also look for:

• Overtime paid without including commissions and bonuses in the regular rate
• Unpaid work before and after shifts, including after-hours calls and emails (see off-the-clock work)
• Commission payments that arrive late or on irregular schedules
• Pay stubs that don’t show how commissions were calculated (see pay stub requirements)
• Unreimbursed mileage, phone and travel costs for sales reps (Labor Code 2802)
• Salespeople misclassified as exempt
• Retaliation for asking about missing commissions

Learn more about our wage and hour practice.

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Frequently asked questions

Can my employer refuse to pay an unpaid commission in California because I quit?

No, not if you already earned it under the plan. Earned commissions are wages and must be paid with your final pay, or when they become payable under the plan if that happens after you leave.

My employer changed my commission plan. Can it apply the change retroactively?

Generally, no. An employer can usually change the plan for future sales, but it can’t use a new plan to reduce commissions you already earned under the old one.

I never got a written commission agreement. Do I lose my commissions?

No. Labor Code 2751 puts the duty on the employer to provide a signed written plan. Without one, your commissions are still owed, and unclear terms are generally read against the employer.

Is my year-end bonus a wage?

It is if it was promised in advance or based on a formula you satisfied. A purely discretionary gift is not. If you received it regularly or it was tied to targets, it may be a non-discretionary wage that also must be included in your overtime rate.

Can my employer charge back a commission when a customer cancels?

Only if the written plan clearly said the commission was not earned until a later condition, such as the customer staying for a set period. Once a commission is fully earned, the employer generally cannot take it back.

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