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  1. #1
    Join Date
    Jul 2008
    Posts
    7

    Default Can a Commission Plan Change be Retroactive

    My question involves employment and labor law for the state of: CA


    I really need some advice. I am a sales executive (software) and have worked for a company for three years. Both myself and the employer are located in CA.

    Our fiscal year runs from 10/1 through 9/31 and we are a publicly traded company, hence the offset fiscal year. This is important because my compensation plan year and schedule is in line with this.

    Each year we get a compensation plan letter that outlines and confirms the plan (percentages, when it is to be paid out, on what, etc). This year, I did not receive a compensation plan before the start of the fiscal year, but had been told by my manager that it would likely be changing, for the better. However they refused to provide details until it was done.

    5 months into the fiscal year, I received a letter stating that my quota has doubled, commission has been cut in half, and my salary adjusted. I can somewhat understand this if it was moving forward, but it also notified me that it was retroactive to any sale closed since the begining of the fiscal year. Unforunately, I am a top sales person at my company and since I have closed alot of business prior to this announcement, I am now getting much less than expected and was in practice.

    I was not being paid all year until this point as they put payments on hold since their commissions were all messed up. So i was patient, only to be royally screwed while out there doing what is right for the company. My sales are very complex and difficult, many taing a dozen engineers and 2-3 years to close. So they cannot argue that any efforts this year were also paid this year.

    Their response is that since I have an annual compensation plan, and last year's expired before the start of this year, the way i WAS getting paid is null and void and therefore with a new plan it automatically started on 10/1/2007 even though it wasn't even drafted and they can pay me whatever they want.

    Can they really do this? I can see where they can change a plan moving forward but to change the rate of pay after the work is done because they chose to withhold? Also do they have any case that the annual sales plan was only for a definable period of time, and had lapsed? If so this means that i had no plan at all or does the previous succeed until a new one?

  2. #2
    Join Date
    Jun 2006
    Location
    Massachusetts
    Posts
    24,521

    Default Re: Commission Plan Change and Retroactive

    Take all the appropriate documentation to an attorney in your state. We cannot interpret the legality or enforceability of a document we have not read.

  3. #3
    Join Date
    Feb 2008
    Posts
    1,179

    Default Re: Commission Plan Change and Retroactive

    Outside salesperson (as defined by the DLSE) :
    Any person, 18 years of age or older, who customarily and regularly works more than half the working time away from the employer's place of business selling tangible or intangible items or obtaining orders or contracts for products, services, or use of facilities
    http://www.dir.ca.gov/dlse/Glossary....%20salesperson

    Are you considered inside or outside sales (based on the definition above)?


    From what I can find, California requires most employers to pay at least 2 times per month. http://www.dir.ca.gov/dlse/FAQ_Paydays.htm However, "outside salesmen" don't show up in the chart on that page.

    As to the retroactiveness, it might depend on the language of the compensation plan documents. Does it address at all what happens if the plan expires and no new plan is in place?

    All I can suggest is calling the DLSE or filing a wage claim.

  4. #4
    Join Date
    Jul 2008
    Posts
    7

    Default Re: Commission Plan Change and Retroactive

    I am outside sales. There is no language in the compensation plan as to what happens if the plan expires only that it is a specific fiscal year plan. Although i cannot imagine that CA would allow a company to control and define what they pay an employee in any manner they like.

  5. #5
    Join Date
    Jul 2008
    Posts
    7

    Default Re: Commission Plan Change and Retroactive

    What document are you referring to? The sales plan document? It is irrelevant as the prescription of the law should be independent of a compensation plan document. It expired anyway..so the law should prevail by default....but what is the law? Hard to find in all the lengthy codes..

  6. #6
    Join Date
    Jun 2006
    Location
    Massachusetts
    Posts
    24,521

    Default Re: Commission Plan Change and Retroactive

    If you are looking for a law that says, once a commission plan for the year has been established it cannot be changed until the end of the year, you're out of luck, because there isn't one.

    I say again, take your commission plan and any other associated documentation to an attorney.

  7. #7
    Join Date
    Jul 2008
    Posts
    7

    Default Re: Commission Plan Change and Retroactive

    Well i was looking for advice on the law, not my document. So this isnt helping. I repeat, my document does not have any rules in it OTHER than the dates ranges tha tthe plan spans across that fiscal year. It does not address the scenario if the plan expires before a new plan is put in place for the following fiscal year. That is the issue, and wondering what the LAW is if a company attempts to tell an employee that there is NO plan "we can pay you whatever we want" because we let your last plan lapse". However, they only tell me this 6 months into the new fiscal year and then pay me whatever they want after the deals are closed and a new plan that is much lower is announced. Again, i am trying to find out what the law is, there is nothing more pertinent in this regard in my document. Please only advise if you can provide more direction of the CA law in this regard. There are laws on commissions, i just have trouble finding them in the code. Outside or inside sales makes no difference, both full-time and commission would be of the same statute on how employers are obligated to fullfll their duties. Thank you

  8. #8
    Join Date
    Jun 2006
    Location
    Massachusetts
    Posts
    24,521

    Default Re: Commission Plan Change and Retroactive

    I've already answered your question. Since you refuse to accept that answer and are determined to find a statute that states your employer is prohibited from changing the commission agreements, all I can tell you is happy hunting.

  9. #9
    Join Date
    May 2008
    Location
    FL
    Posts
    51

    Default Re: Can a Commission Plan Change be Retroactive

    Here is some info on the federal side of the law, if this helps...

    516.16 Commission employees of a retail or service establishment exempt from overtime pay requirements pursuant to section 7(i) of the Act.


    With respect to each employee of a retail or service establishment exempt from the overtime pay requirements of the Act pursuant to the provisions of section 7(i), employers shall maintain and preserve payroll and other records containing all the information and data required by Sec. 516.2(a) except paragraphs (a) (6), (8), (9), and (11), and in addition:

    (a) A symbol, letter or other notation placed on the payroll records identifying each employee who is paid pursuant to section 7(i).

    (b) A copy of the agreement or understanding under which section 7(i) is utilized or, if such agreement or understanding is not in writing, a memorandum summarizing its terms including the basis of compensation, the applicable representative period and the date the agreement was entered into and how long it remains in effect. Such agreements or understandings, or summaries may be individually or collectively drawn up.
    (c) Total compensation paid to each employee each pay period (showing separately the amount of commissions and the amount of noncommission straight-time earnings).

  10. #10
    Join Date
    Aug 2007
    Posts
    3,835

    Default Re: Can a Commission Plan Change be Retroactive

    "Can a Commission Plan Change be Retroactive":

    ONLY if it is so designated at the outset.

    Your commission plan is a contract. Your concern seems to be one of a retroactive application of an ammended contract of commission.

    Here is the kicker. Even if you are legally right, YOU have the burden of proving it, in a court of law, if need be. The company just sits back in thier Ivory tower and they care not.

    You have the hassle of fighting it, it is no paint off the companies car, they could care less if they are wrong.

    Even if you succeed in your quest, they will either pay out or appeal, if a court order, they still loose nothing.

    Employers are notorious for this type of behavior. If the employee does not fight it, they win. If the employee does fight it, then they are then after on the "crap list".

    Best wishes whatever course you take.

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