California Employment Law Quick Study Guide 44
Bonuses, Commissions and RSUs After Termination
A two-page guide to sorting earned compensation, contingent compensation, and severance leverage.
Questions this guide answers
- What happens to bonuses, commissions and RSUs when employment ends?
- What documents and evidence should an employee keep?
- What practical step should an employee take next?
The 60-Second Compensation Triage Map
| Issue | What to ask | Legal status | Negotiation focus |
|---|---|---|---|
| Bonus | Were all written performance and employment conditions satisfied before separation? | PLAN-DEPENDENT | Separate an earned bonus from a future or contingent bonus. |
| Commission | Was the sale, revenue event, or other condition for earning the commission completed? | WAGE IF EARNED | Calculate it separately from severance; a release should not hide the math. |
| RSUs / options | Which tranches are vested? What does the grant or equity plan say happens at termination? | PLAN-DRIVEN | Unvested equity may be forfeitable, but lost vesting can still be negotiation leverage. |
| Retention / sign-on | Is the company demanding repayment, a fee, or a penalty because employment ended? When was the contract signed? | 2026 RULES MAY APPLY | New California “stay-or-pay” limits can matter; the exceptions are technical. |
| Final wages / PTO | Are earned wages, commissions, bonus amounts already due, and accrued vacation included in final pay? | DUE IF EARNED | Do not exchange money already owed for the employer’s release. |
Five California Rules That Control The Money
- Earned wages are not severance. California defines wages broadly, and earned unpaid wages are due immediately on discharge. A willful failure can trigger up to 30 days of waiting-time penalties. Lab. Code §§200, 201, 203
- Earned commissions must be paid. The Labor Commissioner states that commissions earned by termination are final wages; if a legal condition precedent occurs later, payment is due when that condition occurs. DLSE Final Pay FAQ
- Bonus rights turn on the agreed conditions. A promised bonus becomes wages when the employee satisfies the agreed conditions. A clearly written active-employment condition may matter. Neisendorf v. Levi Strauss & Co. (2006) 143 Cal.App.4th 509. The court expressly did not decide a wrongful-discharge/bad-faith scenario.
- Equity can be compensation without being fully earned. The California Supreme Court held that restricted stock could be compensation while continued employment remained a condition to full vesting. Schachter v. Citigroup, Inc. (2009) 47 Cal.4th 610. Plan language matters.
- California added new 2026 “stay-or-pay” limits. For contracts entered on or after January 1, 2026, certain repayment, debt, fee, and penalty terms triggered by separation are unlawful, subject to detailed exceptions. Bus. & Prof. Code §16608; Lab. Code §926. This is not a blanket rule vesting unvested equity.
Earned, Contingent, Or Negotiable? Sort It Before You Sign
| Usually owed if earned | Depends on plan terms | Negotiable in severance |
|---|---|---|
| • Salary through the last day worked • Earned commissions • Earned bonus after all conditions are met • Accrued unused vacation • Other earned wage components | • Unvested RSUs / stock options • Future bonus requiring continued employment • Deferred compensation / §409A terms • Retention or sign-on repayment terms • Change-in-control triggers | • RSU acceleration or cash equivalent • Extend employment through a vesting date • Pro rata or guaranteed bonus treatment • Commission claim carve-outs • Extended option exercise window • Consulting / transition arrangement |
Before You Sign: The Compensation Document Checklist
- Severance agreement and every exhibit/addendum
- Offer letter, employment agreement, and any compensation summary
- Bonus/incentive plan, target metrics, scorecards, and payout history
- Commission plan, quota documents, CRM/deal records, and approval emails
- Equity plan, grant notices, RSU/option agreements, and vesting schedule
- Screenshots or statements showing share counts, vesting dates, and plan balances
- Retention/sign-on bonus, clawback, change-in-control, or deferred-comp documents
Related Ruggles Law Firm Reading
- Complete Guide to California Tech Layoff Severance, RSUs, and Executive Compensation
- How to Negotiate RSU Acceleration in California Severance Agreements
- Laid Off With RSUs in California: When Lost Equity Creates Severance Leverage
- Negotiating Severance for California Finance and Fintech Employees
Open the linked Ruggles Law Firm resource
Official Resources
Frequently Asked Questions
What happens to bonuses, commissions and RSUs when employment ends?
At separation, the controlling questions are what was earned, what rights are being released, what evidence creates risk, and what terms can realistically be negotiated. A two-page guide to sorting earned compensation, contingent compensation, and severance leverage.
What records should an employee preserve?
Useful records often include severance agreement and every exhibit/addendum, offer letter, employment agreement, and any compensation summary, bonus/incentive plan, target metrics, scorecards, and payout history, and commission plan, quota documents, CRM/deal records, and approval emails. Preserve them lawfully and keep an accurate dated chronology.
When should an employee speak with an employment lawyer?
Do not sign, quit, or accept a characterization of the separation without reviewing compensation, claims, deadlines, equity, benefits, and release terms. Severance leverage often disappears after the agreement is signed.
Need a California employment-law evaluation?
Ruggles Law Firm represents California employees. A useful evaluation starts with the documents, the chronology, the employer’s stated reason, and what the record does – or does not – contain.
Contact Ruggles Law Firm or review the employee consultation guide.
“Only when an employee satisfies the condition(s) precedent … can that employee be said to have earned the incentive compensation.” Schachter v. Citigroup, Inc., 47 Cal.4th 610 (2009)
Legal disclaimer: This Quick Study Guide is for general informational and educational purposes only. It is not legal advice, does not create an attorney-client relationship, and is not a substitute for advice from a lawyer who has reviewed the facts, documents, deadlines, and law applicable to a particular matter. Laws change, exceptions matter, and outcomes depend on specific facts.
© 2026 Ruggles Law Firm, APC (a professional corporation). All rights reserved. Informational only – not legal advice.