What Happens to My Unpaid Commissions When I Get Fired in Los Angeles?

If you worked in sales and just got fired, the commissions you earned don't disappear because your badge stopped working. California law is clear on this: commissions are wages. Your employer owes them to you regardless of whether you're still employed when they feel like processing the payment.

Commissions Are Wages, Not Bonuses

Under California Labor Code Section 204.1, commissions are defined as compensation paid for services rendered in the sale of an employer's property or services. They are wages. This distinction matters because wages are subject to California's strict payment requirements.

Your employer cannot reclassify your commissions as "bonuses" or "incentive pay" to avoid paying them after termination. If the compensation is tied to sales you made or deals you closed, it's a commission. The label in your paperwork doesn't override what the payment actually is.

Your Commission Agreement Controls the Timing

California law requires employers to provide a written commission agreement (Labor Code Section 2751). This agreement should spell out when commissions are "earned" and when they're payable. These are two different things.

When is a commission earned? Usually when the sale is made, the contract is signed, or the customer pays. Your agreement defines the triggering event.

When is it payable? This might be immediately, at the end of the month, or when the customer actually pays the invoice. The payment timing can lag behind the earning event.

If you earned commissions before your termination date, those are owed to you even if the payment date hasn't arrived yet. An earned commission is a vested wage. Your employer must pay it on the schedule outlined in the agreement, or at termination if the agreement doesn't address post-termination payment.

Pipeline Deals: The Gray Area

This is where it gets messy. You've been working a deal for three months. The client is ready to sign. Then you get fired on a Friday and the deal closes the following Tuesday. Who gets the commission?

The answer depends on your commission agreement. Some agreements say the commission is earned when the deal closes, meaning you'd need to be employed at closing. Others say it's earned when the sale is "substantially completed," which might include the work you did before termination.

If your agreement is silent on post-termination commissions for pipeline deals, California courts have generally looked at whether the employee was the "procuring cause" of the sale. If you did the work that made the deal happen, there's a strong argument you earned the commission even if the paperwork got signed after your last day.

Many Los Angeles employers try to avoid paying pipeline commissions by pointing to a clause that says commissions require "active employment at the time of payment." These clauses are not always enforceable in California, particularly when they result in forfeiture of wages the employee already earned.

Your Final Paycheck and Commission Timing

Under Labor Code Section 201, when you're fired, all earned wages are due immediately. That includes commissions that have been earned and are calculable. If the commission can't be calculated yet (because the deal hasn't been invoiced, for example), the employer must pay it as soon as it becomes calculable.

Waiting time penalties apply here. If your employer fails to pay earned commissions on time, you're entitled to penalties of one day's wages for each day the payment is late, up to 30 days (Labor Code Section 203). These penalties add up quickly and are a strong incentive for employers to pay what they owe.

What to Watch for in Your Severance Agreement

If your employer is offering a severance agreement alongside unpaid commissions, pay close attention:

Is the severance replacing your commissions? Some employers fold the commission payout into the severance amount. If your severance is $20,000 and they claim $12,000 of that is commissions, you're really only getting $8,000 in actual severance. Commissions owed to you should be separate.

Does the release waive your commission claims? The general release of claims in a severance agreement covers commission disputes. If you sign without carving out your commission rights, you lose the ability to pursue them.

What about future commissions? If you have pipeline deals that will close after your departure, the severance should address how those commissions will be handled. Get it in writing. "We'll pay you if it closes" without specifics isn't good enough.

What to Do Right Now

Pull your commission agreement. Read the earning trigger, payment schedule, and post-termination provisions. If you never received a written commission agreement, that's actually helpful to your claim, since the employer violated Section 2751.

Audit your pipeline. Make a list of every deal you were working on, its status, expected close date, and commission value. Save emails, CRM records, and any documentation showing your involvement.

Calculate what you're owed. Add up earned but unpaid commissions from closed deals, plus any pipeline deals where you were the procuring cause.

If your Los Angeles employer is withholding commissions or trying to bury them in a severance offer, you have options. File a wage claim with the DLSE or talk to a severance and employment attorney who can negotiate the commissions as a separate item from your severance. Free consultations for Los Angeles employees.