Sacramento Employment Lawyer

Chargebacks against Employees' Commissions in California

An employee whose wages are based in part on commissions may face a situation where he is being terminated or laid off, shortly after a transaction (or a number of transactions) that result in earning his commissions take place and before he is paid or where the transaction falls through after he earns his commissions but before he is paid. At that point, the employer may refuse to pay the employee commissions due and argue that the subject employee is not entitled to those commissions. 

Although, the law is not fully clear on the issue of when the employer has the right to withhold commissions, the are certain useful guidelines that the courts have prescribed in the decided cases. In one leading case on the issue of chargebacks against commissions - Harris v. Investor's Business Daily, Inc. 138 Cal.App.4th 28 (2006) - the Second District deal with the issue of withheld commissions. In that case, the employer argued that the company was entitled to withholding commissions because they constituted "advance" to the telemarketers whose job was to sell monthly newspaper subscriptions, because the subscribers had the right to terminate the subscription after signing up, and thus, the company believed, the loss of the business should have been carried on to the employees in charge of obtaining that business. 

The court has rejected the above argument. The court started its analysis by noting the fundamental presumption that the employer shall not take any wages back from the employer after they are earned. Cal. Labor Code section 221. Wages are defined broadly to include all amount for labor performed by employees of every description, whether the amount is fixed or ascertained by the standard time, task, piece, commission basis, or other method of calculation. Cal. Labor Code section 200. The court further held that in order to chargebacks to be legal in that case, (a) the commissions must be specifically identified as "advance" in the company's stated policy or compensation agreement. In addition, (2) the employees must expressly agree to the chargeback policy in writing. 

The Right to Meal Breaks under California Law

California employees' rights to meal breaks are governed by Labor Code section 512 and the applicable wage orders of the Industrial Welfare Commission. It is important to note that the right to meal periods and penalties is non-negotiable and cannot be waived in a collective bargaining agreement. Thus, the employee's membership in a union is immaterial to his right to meal breaks.

On the one hand, the law only requires that an employer make a meal period available and does not obligate employers to actually ensure that employees take advantage of the rights made available to them. Brown v. Federal Express Corp (2008). On the other hand, an employer has to make sure that the breaks are actually available and assuming that alone is not sufficient. Thus, the employer does not satisfy his obligation to provide meal breaks to truck drivers by merely assuming that they take breaks, because an employer has an affirmative obligation to ensure that workers are actually relieved of all duty at such times, and employers also have a duty to record their employees' meal periods. Cicairos v. Summit Logistics, Inc. (2005).

This means, that to avoid liability for failure to provide meal breaks, employers are advised to both (1) make sure that their employees are aware that they have meal breaks (signing an acknowledgment form to that effect might be one effective way to acquire evidence of compliance); and (2) make sure that the employees do not have to do any work while on a break (such as answering occasional work related phone calls, responding to the manager's inquiries while on a break, etc.)