California Overtime and Commission Pay Attorney: Understanding Your Rights to Unpaid Wages and Miscalculated Commissions

A: No, this is not legal under California law. Even if your total yearly income is high, your employer must ensure you are paid at least minimum wage for every hour worked in every single pay period. This is based on the legal requirement that most California employees be paid at least twice per month, with wages earned in each pay period due on a regular, designated payday. You cannot go without a paycheck for two weeks or longer  just because you didn’t close sales during that time. The California Supreme Court made this very clear in Peabody v. Time Warner Cable, Inc., 59 Cal.4th 667 (2014). In that case, the court rejected the idea that employers could “average” commissions over time. Instead, the law requires:

• Minimum wage each pay period: If the commissions earned in a given pay period fall below the minimum wage for all hours worked, your employer must pay additional wages to make up the difference.
• No averaging: Employers cannot borrow from future commission payments to cover minimum wage shortfalls in earlier pay periods.
• No carve-out for commissions: Being paid on a “commission-only” plan does not exempt your employer from these rules. If your commission earnings for a pay period are not enough to cover minimum wage for your hours worked, your employer must provide a supplemental payment or “draw” to ensure compliance.

California commission-only employees cannot be left unpaid for an entire pay period. Even during “slow” weeks or months, your employer must pay you at least the applicable minimum wage for all hours worked.

Why this matters: While minimum wage pay may sound small compared to large commission checks, over time the unpaid amounts can add up significantly. For example, if you regularly work 10 hours per day, 5 days per week, that’s 100 hours in a two-week pay period (80 regular + 20 overtime). At the 2025 minimum wage of $16.50/hour, that equals $1,815 owed for a single two-week pay period.

If this happens in 3–5 pay periods each year, over a 4-year statute of limitations, the total unpaid wages can range from $21,780 to $36,300. And that’s just the beginning. Under Labor Code § 1194.2, you’re also entitled to an equal amount in liquidated damages, which would double the recovery to between $43,560 and $72,600, not including interest, waiting-time penalties, and attorney’s fees.

Speak with a California unpaid commissions attorney today to understand your rights and potential recovery. Whether you’re in Los Angeles, San Francisco, San Jose, Sacramento, or anywhere in California, our firm helps employees recover unpaid sales commissions, challenge illegal payout clauses, and pursue earned wage claims under California Labor Code § 200 and § 204.

A: You must be paid separately for non-selling and non-production work. In California, employers cannot rely on commissions alone to satisfy minimum wage obligations for all hours.

• No averaging / no borrowing: In Oman v. Delta Air Lines, Inc., 9 Cal.5th 762 (2020); The California Supreme Court has made it clear that an employer cannot “average” earnings or “borrow” commission pay to cover minimum wage obligations for other hours.  See also, DLSE Opinion Letter No. 2002.01.29). Therefore, tasks that don’t directly generate commissions, such as driving between job sites, running for parts, waiting for customers, paperwork, meetings, or mandatory vehicle cleaning, must be separately compensated at no less than minimum wage, plus overtime where due.
• Rest breaks must be separately paid: Commission-only employees must also receive separate, hourly compensation for rest breaks. (Vaquero v. Stoneledge Furniture, LLC, 9 Cal. App. 5th 98 (2017) (workers paid on a commission basis must be separately compensated for legally required rest periods).
• Draws against commissions don’t fix it: Courts have rejected the idea that “draws” (advances against commissions) are wages. They are just loans, not separate wages. Steinhebel v. Los Angeles Times Commc’ns, LLC, 126 Cal. App. 4th 696, 704–06 (2005);

This rule also applies to piece-rate and flat-fee employees. The same principles have been applied to workers who are paid by the piece or per task. Courts have consistently required separate pay for non-productive time and rest breaks in Bluford v. Safeway Inc. (2013) 216 Cal.App.4th 864, 872; and Gonzalez v. Downtown LA Motors, LP (2013) 215 Cal.App.4th 36, 51–52; see also Armenta v. Osmose, Inc., 135 Cal. App. 4th 314 (Cal. Ct. App. 2005) (involved hourly employees who maintained utility poles in remote locations and earned pay for hours considered “productive,” but not for hours considered “nonproductive, “such as hours spent traveling to and from a job site). 

These violations are especially common in industries where employees are paid by commission, piece, or flat task rate, including plumbers, mechanics, examiners, drivers, and technicians.

Bottom line: If your employer pays you solely by commission (or piece/flat rate), that pay covers only the productive work (sales or task completions). They must also pay you separately for non-selling time, non-productive tasks, and legally mandated rest breaks—at least at minimum wage, plus overtime where applicable.

Speak with a California commission and piece-rate pay attorney today to find out if you’re entitled to back pay for non-productive time, rest breaks, and unpaid travel hours. Our firm represents employees in Los Angeles, San Francisco, Santa Clara, Oakland, Sacramento, San Jose, and throughout California in cases involving commission-only pay violations, illegal draw systems, and unpaid non-selling time.

Don’t let your employer get free labor between jobs. Contact Kuchinsky Law Office, P.C. for a free case evaluation with an experienced California wage and hour lawyer focused on commission compensation cases.

A: No. California law prohibits employers from taking away wages that have already been earned. Once you have performed all the work required to earn a commission, your employer must pay it, even if you are no longer employed when the customer pays. Clauses that say you must remain employed on the “payout date” are generally considered illegal forfeiture provisions, because they allow the employer to benefit from your work without compensating you.

Key case law:

• In Ellis v. McKinnon Broad. Co., 18 Cal. App. 4th 1796 (1993) a California court found the clause denying a salesperson commissions for sales finalized after his departure to be unconscionable and illegal because the forfeiture was unduly harsh and the employee had no real power to negotiate the contract’s oppressive terms. This meant that once the employee had performed the work to earn the commission, it could not be forfeited simply because he was no longer with the company when the client’s payment was collected.
• In Dana Perfumes, Inc. v. Mullica, 268 F.2d 936 (9th Cir. 1959),  a court found that an employer could not deny a salesperson commissions for sales finalized before his termination but shipped afterward, interpreting the contract language in the employee’s favor and acknowledging the general principle that earned commissions cannot be forfeited. The court acknowledged that it would be “unusual to deny a man payment for that which he has produced as a salesman”. This reflected the view that commissions are earned once the salesperson has done their part of the work in securing the sale, regardless of when the final shipment occurs.
• In Schachter v. Citigroup, Inc., 47 Cal. 4th 610 (2009), the California Supreme Court clarified that forfeiture may apply to conditional incentive plans (like stock options) if the compensation has not yet been “earned.” The case centered on a voluntary incentive plan offered by Citigroup where employees could elect to receive a portion of their annual compensation in the form of discounted restricted stock. This stock had a two-year vesting period, meaning full ownership was contingent on continued employment for that duration. Therefore, upon the employee’s resignation before vesting, no earned wages remained unpaid, and the forfeiture was consistent with the terms of the plan and lawful.

Courts look at whether the commission plan clearly spells out when a commission is considered “earned.” Some plans say commissions are earned upon contract signing; others at delivery; others when the customer pays. The language matters, but courts tend to protect employees once the essential sales work has been completed. If an employee still has substantial obligations tied to the transaction (like servicing an account until payment), a court may consider whether the commission was fully “earned.”

If the employer terminates an employee just to avoid paying a commission, that can amount to wrongful termination in violation of public policy. Phillips v. Gemini Moving Specialist (1998) 63 Cal.App.4th 563, 574

Bottom line: Once you’ve done everything required under the agreement to earn a commission, your employer cannot use a “payout date” clause to avoid paying you. Forcing an employee to forfeit earned commissions is unlawful in California, and courts have consistently struck down such provisions.

Speak with a California unpaid commissions attorney today to understand your rights and potential recovery. Whether you’re in Los Angeles, San Francisco, San Jose, Santa Clara, Oakland, Sacramento, or anywhere in California, our firm helps employees recover unpaid earned commissions, challenge illegal payout clauses, and pursue wage recovery claims under California Labor Code §§ 200, 204, and 221.

Don’t let your employer keep what you’ve already earned. Contact Kuchinsky Law Office, P.C. for a free, confidential consultation with an experienced California commission pay lawyer dedicated to protecting employee rights statewide.

A: It depends. California has a very narrow “commissioned employee exemption” to the overtime rules. Importantly, it is possible that your employer does not have to pay you overtime in one pay period (if you meet all the exemption tests), but must pay you overtime in another pay period (if you fall short). Whether you qualify depends on your earnings in each individual pay period, as explained below.

General overtime rules: Under Labor Code § 510(a) and Wage Order No. 4, subd. 3(A), employees who work more than 8 hours in a day or 40 hours in a week must be paid overtime at 1.5 times their regular rate of pay. In addition, employees who work more than 12 hours in a single workday, or more than 8 hours on the seventh consecutive day of work in a workweek, must be paid at double (2×) their regular rate of pay.

These overtime rules do not apply to commissioned employees if each of the three requirements can be satisfied (exemption):

1. Earnings test. The employee’s earnings must exceed 1.5 × minimum wage in each pay period;
2. Commission test. More than half of the employee’s compensation in that pay period comes from commissions; and
3. Industry test. The employee works in an industry covered by Wage Order No. 4 (mercantile, retail) or Wage Order No. 7 (professional, technical, clerical, mechanical, and similar occupations).

If even one of these requirements is not met in a given pay period, the employee is not exempt and must be paid overtime. In Peabody v. Time Warner Cable, Inc., 59 Cal.4th 662 (2014), the California Supreme Court held that the exemption must be evaluated pay period by pay period, not averaged over time. Employers cannot “borrow” high commissions from one period to cover a shortfall in another.

Example: October 2025 (Minimum Wage = $16.50/hour)

• Step 1 – Earnings test: To be exempt, you must earn more than 1.5 × $16.50 = $24.75 per hour worked in that pay period.
  • If you worked 80 hours in a two-week pay period, you would need to earn at least $1,980 ($24.75 × 80) in that pay period to satisfy the earnings test.
  • If you worked 100 hours, you would need at least $2,475 ($24.75 × 100).
• Step 2 – Commission test: More than half of those earnings must come from commissions.
  • Example: If you earned $2,500 in one pay period, with $2,000 from commissions and $500 from hourly wages or draws, you would satisfy this prong.
  • But if only $800 of the $2,500 came from commissions, you would fail the test.
• Step 3 – Industry test: You must be employed in an industry covered by Wage Order 4 or Wage Order 7. If your industry falls under a different Wage Order, you cannot use this exemption at all.

If you meet all three conditions in that specific pay period → no overtime required.  If you fall short on any condition in that pay period → you must be paid overtime for all hours over 8 per day or 40 per week.

Bottom line: Whether you are overtime-exempt as a commissioned employee is not fixed. It can change from one pay period to the next. If in a given pay period you don’t earn enough or if less than half of your pay comes from commissions, your employer must pay overtime under California law.

Important distinction: The Outside Salesperson Exemption

It’s also important to keep in mind that some commissioned employees may instead qualify for the outside salesperson exemption, which is a completely different overtime exemption.

Under Wage Orders, an “outside salesperson” is:

1. An employee who customarily and regularly works more than half of their working time away from the employer’s place of business, and
2. Is engaged in selling items or obtaining orders/contracts for products, services, or use of facilities.

Outside salespeople are fully exempt from overtime, meal, and rest break requirements, regardless of the commission exemption rules above. This exemption typically applies to traveling sales representatives, field sales consultants, or others who spend most of their work time visiting clients or making sales outside the office.

Speak with a California commission pay attorney today to protect your rights and recover unpaid wages. Whether you’re in Los Angeles, San Francisco, Santa Clara, Oakland, Sacramento, San Jose, or anywhere across California, our firm helps sales employees challenge minimum wage violations, unlawful draw systems, and commission pay abuses under Labor Code §§ 200, 204, 1194, and 510.

A: No. Failing to include commissions when calculating overtime is illegal under California law.

The rule: Overtime pay must be calculated based on an employee’s “regular rate of pay,” not just their base or straight hourly wage. An employee’s regular rate of pay is not the same as the employee’s straight time rate (i.e., his or her normal hourly wage rate). Regular rate of pay, which can change from pay period to pay period, includes adjustments to the straight time rate, reflecting, among other things, shift differentials and the per-hour value of any non-hourly compensation the employee has earned, like commissions, piece-rate pay, and certain bonuses. (Alvarado v. Dart Container Corp. of California (2018) 4 Cal.5th 542, 543 (confirmed that nondiscretionary bonuses must be included in the regular rate calculation for overtime.

Why commissions matter: If you earn $35/hour plus commissions, your true hourly “regular rate” is higher than $35.

Example (2-week pay period)

• You work 90 total hours (80 regular + 10 overtime).
• Your base pay is $35/hour.
• You also earn $600 in commissions.

Step 1.  Figure out your true hourly rate (“regular rate”).

First, add up all your pay:

• Base pay for 90 hours = $3,150
• Commissions = $600
• Total pay = $3,750

Now divide by total hours worked (90).

• $3,750 ÷ 90 = $41.67/hour (this is your regular rate, not $35).

Step 2. Figure out the extra overtime premium owed

You’ve already been paid your base rate for all 90 hours, including the 10 overtime hours. What’s missing is the extra half-time for those 10 hours, based on the regular rate.

• $41.67 ÷ 2 = $20.83 extra owed per overtime hour.
• 10 overtime hours × $20.83 = $208.33 extra owed.

Step 3. Total correct pay

• Straight time already paid: $3,150
• Plus commissions: $600
• Plus overtime premium: $208.33
• Total = $3,958.33

What many employers do (incorrectly): They calculate overtime just from your base rate of $35, paying 1.5 × $35 = $52.50 per OT hour instead of including commissions. Over 10 hours, that gives you $525 in overtime pay instead of the correct $733.33. You’re shorted about $208.33 in that pay period.

Meal/Rest Premiums Must Also Use the Regular Rate

The same rule applies to meal and rest break premiums under Labor Code § 226.7. In Ferra v. Loews Hollywood Hotel, LLC (2021), the California Supreme Court held that “regular rate of compensation” means the same as “regular rate of pay” for overtime. That means these premiums must also include commissions and other nondiscretionary pay—not just your base hourly wage.

If your employer pays break premiums at only $35/hour while ignoring commissions, they are underpaying you. The correct premium should be calculated at your true regular rate (e.g., $41.67/hour in the example above).

Speak with a California overtime and commission pay attorney today to find out if you’re owed unpaid overtime, break premiums, or regular-rate adjustments. Our firm represents employees in Los Angeles, San Francisco, Santa Clara, Oakland, Sacramento, San Jose, and across California who were shorted on overtime pay due to miscalculated regular rates, unpaid commissions, and wage statement violations.

Don’t let payroll errors cost you thousands over time. Contact Kuchinsky Law Office, P.C. for a free, confidential consultation with an experienced California wage and hour lawyer who can help you recover unpaid overtime and commission-based compensation.