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Q.Does an employer have to pay commissions after an employee is terminated? (CA)
A.Typically, when an employee is terminated an employer must pay any previously earned commissions then due and owing. In addition, to the surprise of many employers, is the fact that an employer may be required to pay earned commissions after termination, even if a written contract states that the employee will not be entitled to such commissions.
In California, the courts have held that a contract provision requiring an employee to forfeit commissions on items sold before termination, but not yet paid for by a customer to be void. However, the courts have enforced contract provisions stating that commissions will only be paid on items paid for within 30 days of resignation.
California employers should therefore review their contract clauses relating to the payment of commissions after termination, and ensure they are clear and reasonable in light of the above court rulings. If there is any doubt, have the clause reviewed, and revised if necessary, by a competent licensed attorney familiar with employment law.
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