Can an Employer Withhold Commission After You Resign?

Before you quit your job, consider any potential repercussions that may arise. For example, can an employer withhold commission if you quit? The answer is not as straightforward as you might think. 

Explore an employer’s right to withhold commission after an employee resigns. Then contact D.Law for a legal consultation before you quit. 

What Happens to Your Commission When You Resign?

Commission pay is compensation that an employee can earn based on the revenue they generate through the company. Employees often earn commission under their employment contracts for meeting certain performance objectives or closing sales. 

The amount and structure of the commission can vary significantly depending on the company. In many workplaces, commission is used as a performance incentive, not given as the sole form of payment. 

Commission pay can significantly increase an employee’s wages. So it makes sense to ask whether an employer can withhold commission after you quit. 

Generally, an employer needs to pay out all of the wages you have earned when you quit. They would be required to send your final paycheck with these wages within 72 hours of your resignation. 

However, there may be certain cases in which an employer can legally withhold commission from the final paycheck. Speak with an employment attorney about whether doing so would be lawful according to the terms of your employment. 

When Can an Employer Withhold Commission If You Quit?

Wage laws require employers to pay you the wages you have rightfully earned. However, commissions sometimes fall under a gray area in wage laws. Employers have the right to create specific contractual policies about how and when they pay out commissions. 

An employer may be able to lawfully withhold commission if your commission agreement includes forfeiture provisions. This means that if you were to quit before receiving your commission, you would forfeit it. 

The contract may also include specific terms about how long you need to stay employed with the company to receive commissions. For example, some companies allow workers to earn commission wages throughout their first year, but these wages would only be paid out after they have reached one year of employment. 

Generally, an employer in CA cannot withhold commission unless the employment contract specifically states otherwise. 

Quitting Under Constructive Discharge 

If your commission agreement or employment contract does contain forfeiture provisions or other terms that would allow your employer to withhold commission if you quit, consider whether you quit under constructive discharge. Constructive discharge happens when an employee’s resignation may be found to not be voluntary because their employer has created conditions so intolerable that any reasonable person would feel obligated to quit. 

If you quit under these conditions, your employer may not be able to lawfully withhold the commission you earned. Constructive discharge awards workers some of the same rights as wrongful termination. 

Can You Continue Earning Commission After You Quit? 

You may wonder whether you have the right to earn commission on deals that close after you quit that you played a major part in. Or perhaps your company provides annual commission checks on recurring contracts, and you wonder whether you will continue earning those after you leave. 

The answer depends on the terms of your commission agreement. California law may not consider these commission wages to be wages you “earned” and therefore may not require your employer to pay them out. 

Detailed commission agreements should specify how your employer will approach paying out commissions when employees leave the company.  

What To Do If Your Employer Unlawfully Withholds Commission 

If you believe your employer has withheld commission from you unlawfully after your resignation, your first step should be to request the unpaid wages from your employer in writing. Keep copies of your communications with them on multiple devices. The unpaid wages may have been an oversight, and your employer should be willing to correct the issue if so. 

If your employer does not respond to your communications or states that it does not owe you commission that you believe you earned, speak with an employment attorney about your options. They can review your employment contract and help you understand whether your employer violated employment law. 

If so, your attorney can help you file a wage claim with the California Labor Commissioner’s Office. The Labor Commissioner can review your case and, if they find that your employer committed wage theft, order them to pay unpaid wages, penalties, and interest, depending on the circumstances. 

Contact D.Law for Legal Assistance in California 

Can an employer withhold commission if you quit? D.Law can provide a more personalized answer to this question based on your employment contract, commission agreement, and other relevant factors. Allow us to help you understand California wage laws and seek the wages your employer rightfully owes you. 

Contact D.Law today at 818-275-5799 to request a consultation. 

Frequently Asked Questions 

Does a company have to pay out commission? 

A company generally has to pay out the commission an employee earned, even if they quit before receiving the payment. However, commission agreements sometimes include forfeiture provisions that may require workers to forfeit their commission earnings upon resignation. Talk to an attorney about your specific case. 

How long can a company withhold commission after an employee quits? 

A company generally needs to provide the worker’s final paycheck within 72 hours of their resignation. If the commissions are not readily calculable at this time, the company is responsible for paying them as soon as they can be determined. If your employer has not yet paid out your commissions, speak with an attorney about your legal options. 

What is a commission clawback after leaving a company? 

A commission chargeback or clawback happens when an employer deducts a commission they previously paid from your future wages. California law only permits employers to do this on advanced commissions, or ones made before an employee legally earned them. If your employer deducted a past commission you rightfully earned from your final paycheck, they may be committing wage theft.