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Unpaid Commissions

Many employees who leave an employer suffer from unpaid commissions. This is a murky area in California labor law. As a general rule of thumb, employees who substantially completed the necessary work to complete a commissionable event (i.e. a home loan) should be entitled to payment of such commission. In the event another individual in the company, after the departure of the employee, had to perform substantial duties to complete the commissionable event, such commission possibly could be withheld.

The payment of commissions to employees who separate from employment, are due at the normal time commissions are computed and distributed as payroll. Contrary to popular belief, commission payments need not be accelerated and paid at the time of separation of employment, as is the case with other wages and accrued vacation.

Many commission based employees, such as loan officers, may be entitled to overtime pay. Such overtime pay is supported by a July 14, 2002 opinion of the California Division of Labor Standards Enforcement which directs that overtime is computed by first dividing the total pay for the week by the total hours worked. This will establish the regular rate of pay. For each overtime hour worked, the employee is entitled to ½ of the base pay for those overtime hours requiring time and a half, and an additional 1 hour of base pay for those hours requiring payment of double time.

A California labor attorney can provide a careful analysis to determine if an employee is entitled to unpaid commissions or if a commission employee is entitled to overtime pay.


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