“He who shakes the tree is the one to gather the fruit.”
E. A. Strout W. Realty Agency, Inc. v Lewis (1967)
Written by Patrick R. Kitchin
California law requires employers to pay sales commissions to employees in accordance with their commission agreements, often even when they are not employed at the time the commission payments come due. In other words, if an employee made a sale, or was the salesperson who procured a sale that later closed, she could be entitled to commissions on the sale long after her employment ended. Although some commission agreements contain forfeiture provisions that require an employee to be employed at the time the commission is due (e.g., when the customer pays), many of those forfeiture provisions are contrary to California law and could be found to be unconscionable.
In Willson v Turner Resilient Floors (1949), the court explained that, “…to be entitled to his commissions as the procuring cause, the agent does not necessarily have to consummate the transaction… The word “procure” does not necessarily imply the formal consummation of an agreement.” “The originating cause, which ultimately led to the conclusion of the transaction, is held to be the procuring cause. (Sessions v. Pacific Improvement Co., 57 Cal.App. 1.) Similarly, in Chamberlain v. Abeles, (1948), the court explained that,”[t]he word “procure” does not necessarily imply the formal consummation of an agreement. … The originating cause, which ultimately led to the conclusion of the transaction, is held to be the procuring cause. (Sessions v. Pacific Improvement Co., 57 Cal.App. 1) “To originate a sale is to give to it a genesis, to stand as the parent, the creative force from which the final transaction traces its birth. The word carries no implication requiring the originator to be also the finisher, or to be at once the alpha and the omega.”
California law governing the right to commission wages after termination of employment is fairly complex and involves issues pertaining to wage rights, contract interpretation and unconscionability. If a decision to terminate an employee is based in substantial part on the company’s desire to withhold earned commissions from an employee, then the termination might be found to be in violation of California public policy, entitling the employee to punitive damages.
I have substantial experience prosecuting commission cases. If you have any questions about California employment law, please call me at 415-677-9058, email me at firstname.lastname@example.org.