Commission & Bonus Payments

California law regarding employees’ rights to commission payments and earned bonuses can be complex. 

Rights to commissions often depends on both the terms of the employer’s commission agreement or plan between employer and employee and state statutes. The employer’s commission payment agreement or plan must be in writing and explain how commissions are calculated. It should also be signed by the employer, with a signed receipt from the employee.    

The commission plan typically determines when an employee’s commission is considered “earned” or “accrued,” which is typically triggered when the sale is finalized, product is delivered, or payment from the customer is made. Once the employee has fulfilled the conditions required under the plan, the commission is deemed an earned wage that the employer must pay under California law.

Whether an employee is entitled to a bonus depends on whether it is non-discretionary or discretionary. If the bonus program depends on objective criteria, like individual or group achievements (e.g., reaching set sales/production levels), or certain events (e.g., anniversary dates), then the bonus is non-discretionary. Once the achievements are met or events occur, the bonus becomes an earned wage and must be paid. However, if the employer retains the right to determine if a bonus will be paid or determine the amount of the bonus, then it is a discretionary bonus to which the employee has no rights.