TWELVE ELEMENTS THAT MAKE A STRONG EMPLOYMENT LAWSUIT IN CALIFORNIA

By Matt Ruggles, California Employment Lawyer

After more than 30 years of litigating employment law cases across California, I can now recognize certain fact patterns that differentiate a strong employment lawsuit from a weak one. I’ve represented employees (and employers) in every corner of California and before nearly every government agency that hears workplace claims—the California Unemployment Insurance Appeals Board, the EEOC, the NLRB, and beyond. What I’ve learned is this: not every bad employment experience turns into a viable legal case. But when a case is strong, you can usually feel it from the outset.

In this blog, I’m going to walk you through the twelve elements that make a strong employment lawsuit in California—real-world factors that I’ve seen time and again lead to meaningful settlements and successful verdicts. Whether you’re thinking about filing a lawsuit or just trying to understand your rights, this guide is designed to help you see what makes a case work—and what doesn’t.

Table of Contents

• Element 1: An Honest Plaintiff
• Element 2: An Employer That Can Pay
• Element 3: Long-Term Employment
• Element 4: Highly Rated Job Performance
• Element 5: Termination While on a Disability Leave of Absence
• Element 6: An Employee Misclassified as Exempt from Overtime
• Element 7: Hourly Wage Earner with No Contemporaneous Time Record
• Element 8: Termination Without Any Investigation
• Element 9: Illegal Chargebacks of “Advance Commissions” That Are Earned Wages
• Element 10: Personal Involvement of Company Owner or C-Suite Executive
• Element 11: Termination with Low Prospects of Re-employment in Comparable Employment
• Element 12: A Claim for Quid Pro Quo Sexual Harassment

Element #1: An Honest Plaintiff

When evaluating any potential employment lawsuit, the first question I ask is always the same: is the Plaintiff honest? That may sound obvious, but in employment law, credibility isn’t just important, it’s everything.

Employment Cases Are Built on Subjective Facts, Not Objective Proof

Employment litigation is a bit unique than other areas of law because employment lawsuits often involve subjective considerations, rather than objective facts that can be measured.  For instance, employment lawsuits are fundamentally different from personal injury lawsuits involving automobile accidents or slip-and-fall lawsuits. In personal injury cases, liability is often clear because the parties can objectively determine that the defendant ran a red light resulting in the collision, or there is security camera footage of someone slipping on a wet floor. The real fight in those cases most often is over damages; not liability or who is at fault.

Employment lawsuits are basically the opposite: liability always is contested, but damages not so much. Employers being sued rarely, if ever, admit to wrongful conduct such as discrimination, harassment or retaliation no matter how clear it may seem from the employee’s perspective.  That’s because it’s a subjective determination, including what factors the decision-maker purportedly considered and which factors were the most important and why.  In other words, employment lawsuits generally involve a particular manager’s or supervisor’s motives, perceptions, and interpersonal dynamics, not objective facts like tire marks or broken bones. The core issue most often comes down to: Why was this person fired?

It should not be a surprise that almost universally, a terminated employee does not agree with the reason for termination, primarily because the employer has a more critical and more damning perspective on the terminated employee’s job performance compared to the individual employee’s own perception of his/her job performance.   If your case becomes a “he said, she said,” the judge or jury must decide who they believe, and therefore the person bringing the lawsuit must have his/her credibility intact.  Simply put, in most employment cases the plaintiff-employee’s credibility is under a microscope.  While no one is perfect and perfection is not required for a successful employment claim, you do need to be honest and fair in describing what happened if your claim is going to be successful.

The Plaintiff’s Credibility Is Always Under a Microscope

Emotions also play a role here. A plaintiff’s reaction to the adverse events (i.e. termination) must be proportionate and believable. If someone claims severe emotional trauma over something like being asked on a date by a manager one time after work, a claim of “harassment” may come off as exaggerated and damage credibility. Simply put, there must be appropriate emotional weight to match the alleged harm.

One of the most damaging things to credibility is a felony conviction. In California, a felony conviction almost always undermines the plaintiff-employee’s credibility. That’s because the defendant-employer is entitled to a jury instruction stating that the jury is not required to believe anything the plaintiff says. That can be devastating, especially if the underlying felony conviction involves dishonesty or violence. On the other hand, if the conviction is unrelated (like an 20-year old DUI), it’s less harmful, but anyone with a felony conviction is facing an uphill battle on the issue of credibility.

That said, honesty isn’t just about criminal records. It’s also about how you present yourself as a witness. Are you thoughtful and accurate? Are you fair about what happened? Are you willing to acknowledge the good along with the bad? If you come off as evasive or insincere, your case will  lose steam regardless of the facts.

Employers Bet on Being More Believable

In short, the first thing I need in a plaintiff is someone who will be believed and makes a good witness. Without credibility, no matter how strong the facts are, the case likely won’t go anywhere. Employers know this. They bet heavily on being more believable than you. In order for me to decide to represent a terminated employee, I need to make sure he/she is the kind of plaintiff who can meet that test.

Element #2: An Employer That Can Pay

This one’s pretty simple: you’ve got to be suing an employer that actually has the financial resources to pay the claim or whatever amount you demand as a settlement.  As the saying goes, you cannot get “blood from a turnip,” and suing company that simply does not have the financial resources to pay will never result in a satisfactory resolution.

Lawsuits Are About Money, Not Apologies

Many times, potential clients will express that a potential monetary award is not the motivating factor in the employee’s decision to pursue legal action; instead, the client wants vindication or an apology for the harm caused by the employer’s misconduct.

While I understand that sentiment and agree it can be a valid reason to file a lawsuit, it’s important to recognize and acknowledge that generally speaking, the only thing a lawsuit can get you is money.  Almost without exception, defendant-employers are extremely reluctant to admit wrongdoing, make an apology, or re-hire a wrongfully terminated employee.  Consequently, pursuing a litigation goal in a lawsuit for something other than money makes the process much more aggravating, tedious and expensive.  Because most employment lawsuits are done on a contingency basis, it’s next to impossible to retain a lawyer when the potential client/terminated employee wants to “make a point” rather than get paid because there is no opportunity for the attorney pursuing the matter to get paid.

Financially Struggling Employers Are Risky Defendants

Any large regional or national corporation is going to have the resources needed to satisfy nearly any potential individual lawsuit. Keep in mind that when you sue an employer that is struggling financially, the employer’s financial problems are compounded by the lawsuit and the (significant) amount of money that the employer must pay its own attorney just to defend the lawsuit.

That’s why I always explain to clients that the point of a lawsuit is to get money from the employer you are suing, nothing else. It’s not about establishing what’s “right,” or what’s “fair,” or what’s “just.” A lot of people think that’s what the law is about, but it’s not. People assume the legal system is built around fairness and justice, but those concepts aren’t the law. The law is just the law. The rules are the rules. They’re not created because they make everything perfectly fair. Laws are passed by politicians trying to get votes in Sacramento, and they don’t always make sense or line up cleanly.

Why Foreign Corporations Are Ideal Defendants

That said, the biggest corporations aren’t always the best defendants. Some of them, particularly large retail chain stores, often have their legal compliance issues in order because many big companies are not cutting corners on HR or legal advice. The sweet spot tends to be what the law calls “foreign corporations.”  A foreign corporation in California is not a company incorporated outside the United States like Mercedes-Benz.  Instead, under the law a foreign corporation is any corporation doing business in California that is incorporated in another state outside California (most often, Delaware), meaning employers based outside of California who have regional operations here in California.

Out-of-State Employers Often Make California Law Mistakes

Why are foreign corporations often the best employers to sue? Because they’re the most likely to screw it up.  Many HR departments outside of California often don’t fully understand California law. They might be using a severance agreement they’ve used 100 times in Oklahoma with no problems. That agreement might be perfectly legal in Oklahoma, but in California? Totally different ball game. California has unique, complex rules that are much stricter than any other state. And if you’re an out-of-state employer who doesn’t understand the “ABC concept” of employment law (meaning something that is legal Anywhere But California) or the nuances of California’s wage and hour rules, you’re likely to make mistakes. For instance, when I was a defense attorney representing employers, we often commented there are only two kinds of employers:  employer’s that know they have legal problems, and employers that don’t know they have legal problems; every single employer on Earth has potential legal problems, and that is especially true in California.  That’s why “foreign” corporations make great defendants: many don’t know they’re doing something wrong/illegal until it’s too late.

Element #3: Long-term Employment

If you lose a short-term job—say, you worked somewhere for a few days or even a few weeks and got fired—you really haven’t lost much. There’s just not much to recover, and the case probably isn’t worth much. But if you’ve had long-term employment, now we’re talking about real value, especially when it comes to lost wages. Lost wages often are one of the biggest drivers in employment cases when determining overall value, and long-term employees usually have the best argument that they would have continued employment absent the wrongful termination of employment.

How Many Years Count as Long-Term Employment?

What do I consider “long term”? More than five years is good, but ideally 10 years or more. If you’ve worked somewhere for a decade, that means you likely are a loyal and dedicated employee. It shows stability. It gives us a clear wage earning/compensation history. Most importantly, long-term employment allows us to make a reasonable and persuasive projection of future earnings.

California is an at-will employment state, most everyone knows that, and the concept is codified in California Labor Code section 2922.  In a nutshell, that means your employer can terminate you at any time without notice, for any reason or no reason at all, just so long as it’s not an illegal reason.  So technically, how long you’ve been employed doesn’t make a particular termination illegal; in fact, the argument that long-term tenure creates an exception to at-will employment was rejected many years ago by the California Supreme Court when it ruled that long-term employment, even decades of employment, does not change the at-will nature of employment in California.

Jurors Care About Loyalty and Longevity

But here’s the thing: that doesn’t mean the argument doesn’t have any practical use. What a terminated employee is banking on is that a jury of the plaintiff’s peers is likely to be more sympathetic to a long-term employee compared to a short-term employee. Jurors don’t sit there thinking, “well, sure he worked at the company for 30 years, but Labor Code 2922 says his termination was perfectly fine.” Instead, most reasonable jurors react quite strongly when they learn that someone worked 10, 15, 25 years and got tossed out unjustly, and they react emotionally. When the corporate defense lawyer has to explain why that long service doesn’t matter legally, it just doesn’t land well because almost no one outside the law really understands the scope and application of at-will employment, and one explanation at trial will go in one ear and right out the other, just like almost every other legal concept. The law is quite confusing, complex and difficult to understand.  Usually, the legal explanations from the corporate employer sound like excuses, especially to a jury.  That’s because long-term employees reach that status through consistent and satisfactory job performance that doesn’t normally change suddenly, like it does when any long-term employee gets suddenly and unjustly terminated.

Long-Term Employment Creates Leverage

If you’ve worked somewhere a long time and got fired, that’s powerful. It may not be a technical legal advantage, but it carries real weight. It shows commitment, reliability, and often plays strongly with decision-makers who can’t explain it away in a believable way.

So long-term employment gives us leverage. It creates sympathy. It makes the numbers look better. And in litigation, especially employment litigation, those things matter, sometimes more than the law.

Element 4: Highly Rated Job Performance

Highly rated job performance goes a long way in making a strong employment case. Not surprisingly, the best employment lawsuits are the ones where the employee didn’t deserve to be fired. That’s what gives the claim credibility because if job performance consistently was solid and met expectations, then the termination starts to look suspicious.  Job performance is usually the number one factor in employment because it’s the reason you’re getting paid in the first place. If your reviews were positive, or even just steady, that helps. Even if you had performance problems early on, that’s not fatal to the case.

Why the Most Recent Performance Review Matters Most

What really matters the most is the performance review immediately before the termination.  That last review is the most important, every single time. If it shows poor performance or significant areas “needing improvement” or other “growth opportunities,” that’s going to hurt the case because it supports the employer’s legitimate, good faith reason for the termination. But if the last review prior to termination shows you were “meeting expectations” or better, that can help bolster the value of the case.

It’s acceptable if you struggled early in your employment but brought it up to “meets expectations” by the end. That’s a believable growth story. But if your last evaluation shows “does not meet” across the board, and then you were fired, that’s a problem.

Bottom line: you want that final performance review to show you were doing your job. Because if you were, then it’s hard for the employer to explain why they really let you go, and that’s where the case starts to turn in your favor.

Element #5: Termination While On a Disability Leave of Absence

The particular issue of termination during a disability leave of absence from work is probably the most misunderstood part of California employment law. It’s the most difficult thing for employers to get right, and most of them have no idea what their actual obligations are under the Fair Employment and Housing Act (FEHA), which is the California law that requires employers to make reasonable accommodations for employees that meet the definition of “qualified individual with a  disability.”

Why Disability Leave Terminations Are So Misunderstood

The FEHA requires employers to provide reasonable accommodations to employees with disabilities, and that includes leaves of absence from work because of a disability or a temporary disability. But most employers don’t fully understand what that means. They don’t know how to evaluate requests for accommodations correctly, and most employers do not understand when a termination is permitted. I’ve seen many California employers that simply don’t know how to comply with the law. And because of that, they routinely get it wrong.

When Termination of a Disabled Employee Is Lawful

Disability discrimination is different from every other kind of discrimination prohibited by the FEHA because sometimes it’s perfectly lawful to terminate a disabled employee or an employee on a leave of absence because of a disability.  That’s never the case with any other form of discrimination because an employer never is permitted to terminate an employee because of race, religion, gender, sexual orientation or any other “protected characteristic” under the law. But not so with disability discrimination. Sometimes it’s allowed if the employee is unable to return to work or if the employee cannot perform the essential functions of the job with or without a reasonable accommodation; in very simple terms, if you are “too disabled” the employer can lawfully terminate you, even if the reason for termination expressly and explicitly is your disability, and even if the disability is work-related and entirely the employer’s fault. That’s why it trips up HR employees, especially in companies where the HR department is based outside of California, as explained above.

On top of that, in nearly all situations, an employer must go through a mandated process with the employee called “the interactive process” prior to termination.  The interactive process is required to determine if there is any reasonable accommodation available to the employee at work.  Most employers either skip this step entirely, or do it in an improper, truncated and summary manner that does not comply with the law.

Many times, the application of disability discrimination laws to the workplace makes both employers and employees question the fairness of the system.  What I mean is this: most employees incorrectly believe that termination because of a leave of absence or because of a disability always is illegal and it isn’t; most employers incorrectly believe that they don’t really have to do much to terminate a disabled employee who no longer is 100% and needs assistance to do the job the employee was hired to perform.

Most people can’t wrap their heads around that. And neither can most employers, who get disability discrimination law and “at will employment” confused to no end; the two concepts have virtually nothing to do with one another.  Furthermore, most employers don’t understand what the FEHA requires, especially when someone is on a leave of absence, a common reasonable accommodation recognized under the law. To terminate someone during that leave, the employer has to show that continued leave would create an undue hardship for the employer. That term is defined in the California Code of Regulations, and it’s a high bar. In fact, after practicing employment law for over 30 years, I cannot recall a single employer that has gone through the proper analysis and procedure, although I am sure there are some out there.

Why Disability Leave Termination Cases Are Often Strong

Even when a decision to terminate is arguably justified, employers usually bungle the process. They don’t document anything. They don’t analyze the hardship. They don’t engage in the interactive process the way they’re supposed to. And because of that, they make illegal decisions when the termination might have been lawful, had they done it correctly.

That’s why termination cases arising from a disability leave of absence tend to be good claims against the employer. The FEHA is strict. The rules are clear. But most employers just don’t follow them or even understand them.

Element #6: An Employee Misclassified as Exempt from Overtime

Employees misclassified by the employer as “exempt” from California overtime laws are some of the best cases because claims are relatively easy to identify in almost any midsize to large corporation.  In any corporation or business operation, the most likely misclassified employees every single time are the lowest paid employees that are paid a regular salary.  In fact, the required “independent discretion and authority” for an individual supervisor or manager necessary to properly classify an employee as “exempt” sometimes is absent except for only the highest and most senior executives in the organization.  While some HR folks understand “exempt vs. non-exempt” better than others, many employers and HR workers have only a superficial understanding of how to properly determine if a California employee qualifies for an exemption from overtime under California law.

Low-Paid Salaried Employees Are Most at Risk

Although the amount of salary beyond the minimum statutory amount (2X minimum wage at FT for 1 year) does not affect and is not a factor in the exempt/non-exempt determination, most people being paid millions of dollars in salary aren’t worrying about unpaid overtime.  Instead, the focus always is on employees lowest on the salary scale who tend to be newer to the organization/less senior, or recently converted from hourly pay to salary.  As a result, lower level, lower authority salaried employees make a better claim because the scope of their job duties and authority often is unclear and overstated in formal job descriptions.

One of the biggest red flags that tends to indicate a misclassified employee are employees  paid just above the legal minimum salary threshold (2X minimum wage at FT for 1 year), barely enough to qualify as exempt. That’s where the “cheating” makes sense financially for the employer, which is never a good idea. But from the employer’s perspective, that’s where they think they’re saving money on overtime – the lowest paid salaried employee, who almost certainly is putting in more than 40 hours per week.

Salary Alone Does Not Make an Employee Exempt

Now, this is an essential point of law to understand: being paid a salary does not make an employee exempt from California overtime laws. That’s one of the biggest misunderstandings in the law, and one of the biggest mistakes that employers make.  Being paid a salary is one of many requirements that must be satisfied to classify an employee as exempt from overtime, but it is not determinative, meaning, it’s never the tie breaker.

Duties, Not Titles, Determine Exemption

To be exempt, the employee must meet very specific duties tests, and those duties must be the employee’s primary responsibilities, not just occasional tasks that are the exception rather than the rule. Managing people in name only doesn’t cut it,  and neither does a great sounding title like “Senior Manager.”  Consequently, when we see an employee who’s paid a low salary and called a “manager,” and therefore classified as exempt by the employer, but they don’t manage anyone and they’re just doing routine tasks, that’s a red flag. That employee likely is misclassified as exempt and likely owed overtime wages, including the corresponding statutory penalties under the Labor Code.

An Employee’s Overtime Estimate Is Presumed Correct

Here’s where it gets even better from a plaintiff-employee’s perspective: employers in California are required to keep contemporaneous daily, weekly and monthly time records for non-exempt employees. But employers do not often track exempt employee hours, so there almost never is a daily, weekly or monthly record of all hours worked by the misclassified employee.  Under California law, if the employer didn’t keep time records but should have, any reasonable estimate from the employee about hours worked is presumed correct.

Let me say that again: the employee’s estimate of overtime hours work is presumed correct if the employer failed to keep contemporaneous time records. In fact, any reasonable estimate of hours worked by the employee is presumed correct. An employee’s estimate doesn’t have to be based on written records; an employee’s good faith estimate can be based entirely on memory, so long as it’s a reasonable and good faith estimate by the employee. Because the employee’s estimate is presumed correct under the law, that effectively shifts the burden of proof to the employer to prove the employee’s estimate is wrong.  Here’s the problem for the employer: the only  legitimate evidence to contradict the employee’s estimate would be contemporaneous time records which the employer doesn’t have because it claimed the employee was exempt.  Absent daily video recordings showing entry/exit each day or some other reliable method to determine actual hours worked (which is very uncommon), most employers struggle and face a significant chance of losing a dispute over hours worked by a misclassified employee.

Employers Bear the Burden of Proof on Misclassification

Here is the last point that makes these claims really great: under California law, all employees in California are presumed to be “non-exempt” and entitled to overtime pay.  The burden of proof on any misclassification dispute always is on the employer, not the employee asserting the claim.  That means that the employer must prove it is innocent, a significant litigation advantage that cannot be understated or ignored.

As a result, any misclassified employee has a presumptively valid claim for unpaid overtime, missed meal and rest breaks, incorrect wage statements, with statutory Labor Code penalties stacking up. Add on top of that the attorney’s fees required to litigate such a claim, and even a small misclassification lawsuit can get very expensive for the employer, far outpacing the underlying unpaid wage claim.

Misclassification cases are some of the best cases out there. I’d say solid gold.

If you believe your employer may have misclassified you as exempt from overtime, our detailed guide How Do I Resolve a Misclassification Dispute in California? walks you through the steps to protect your rights and recover what you’re owed.

Element #7: Hourly Wage Earner with No Contemporaneous Time Record

As I explained earlier, under California law, employers are required to keep contemporaneous time records for all hourly employees. That means an employer has a duty to record work start times, end times, and meal breaks on a daily basis. Not doing that is a big problem because once those records are missing, the law gives the benefit of the doubt to the employee every time.

Missing Time Records Give the Benefit of Doubt to the Employee

Here’s what happens: if you’ve been working hourly and the employer hasn’t been keeping daily or weekly time records, you’re in a great position to assert a wage claim, assuming of course you actually worked overtime for which you were not paid. Most of the time, when time records are missing, it’s because people are working more hours than they’re being paid for and the employer is pretending not to see or know what is happening.

Sometimes it looks like this: you’re technically paid hourly, but you get the exact same paycheck every week—$1,500, $1,500, $1,500—week in and week out. That’s not hourly pay. That’s basically a salary.  Importantly, the employer is not permitted to “gross up” wages by offering to include a set weekly amount that purportedly includes overtime pay; that’s  not separately calculating your overtime or your missed meal and rest breaks, that’s a direct violation of California law. An employer cannot have an express or implied agreement with an employee that says, “this flat amount includes your overtime.” California law forbids it. Overtime has to be calculated and paid in addition to your regular rate, not buried inside it.  In fact, the “grossed up” amount that the employer pays an employee in this scenario legally covers only 40 hours of straight-time work per week, not any overtime.  Effectively, this ploy backfires on employers because now the regular hourly rate is “artificially high” because of the improper bump to cover overtime hours; it doesn’t matter how much the employer sweetens the regular payment, it always only covers straight time, not overtime.

Stacking Penalties Under the Labor Code

When an hourly wage earner isn’t having their time tracked properly, statutory penalties under the Labor Code begin stacking up. For instance, if you are owed unpaid overtime, then you also are entitled to penalties for non-payment of wages, incorrect wage statements, and more. It all adds up quickly, especially when the employer didn’t keep the records they were legally obligated to maintain.

Employee Estimates Are Presumed Correct

And just like in misclassification cases, once those records are missing, the employee’s version of the hours worked is presumed correct. That means your own good faith estimate, based on your memory, is enough to shift the burden to the employer to disprove it. And if the employer has no records? The employer almost certainly is not going to be able to effectively or persuasively disprove the employee’s good faith estimate of overtime hours worked.

These cases are incredibly strong. Once you start tallying up the missed wages, penalties, and attorney’s fees, unpaid wage claims become very hard for the employer to defend. And they usually don’t even know how bad the exposure is until it’s too late.

Element #8: Termination Without Any Investigation

This comes up a lot in cases involving alleged workplace harassment, especially sexual harassment. What happens is this: an employer gets a complaint, and instead of conducting a real investigation, they do something quick and superficial. Maybe they ask one or two people, “hey, did you ever see Roger harass her?” and someone responds, “well, saw them go to lunch together a few times,” and that’s enough. Boom—Roger is fired.

That kind of decision-making is reckless. It’s not based on facts. It’s not based on evidence. And it can be defamatory, especially because no good-faith investigation was completed prior to termination.

When an employer terminates an employee for alleged misconduct, especially sexual harassment, the employer is required to conduct an internal investigation to determine what really happened. The employer cannot claim to have a good faith belief that an employee engaged in misconduct if the employer never bothered to investigate in the first place. For instance, if the employer never interviewed the person accused of workplace misconduct, the employer likely didn’t conduct an appropriate workplace investigation, and therefore likely is acting without all of the facts that reasonably are necessary to make a legal termination decision.  I’ve seen employers make termination decisions without ever talking to the accused employee. They’ll say something like, “we had no reason not to believe her.” But that’s not the standard. An employer is supposed to determine what actually happened—not just take one side at face value.  As a result, the accusation of alleged sexual harassment can qualify as defamation, especially when the accusation is spread throughout the workplace or broadcast to others that have no legitimate reason to know of the reason for termination.

Even if defamation isn’t part of the lawsuit, when the employer defends the termination in litigation, a lack of investigation makes the employer’s case look weak. It’s easy to poke holes in it. The jury can tell when an employer didn’t do their homework, and it casts doubt on their whole story.

California law doesn’t require a perfect investigation, but it does requires more than superficial action by the employer. When there’s no investigation at all, the employer’s stated reason for termination starts to look flimsy. That opens the door to liability because now the employee can credibly argue that the real reason was illegal, such as retaliation, discrimination, or some other violation of the law.

Element #9: Illegal Chargebacks of “Advance Commissions” That Are Earned Wages

If your compensation at work includes commission payments, it’s common for employees to be paid commissions in two parts. The first part is often paid upfront, sometimes at the time of the sale, and the second part is paid when all the conditions of the deal/sale are satisfied. Once those conditions are met and the full commission is earned, that payment becomes an earned wage under California law. And once it’s an earned wage, it cannot be clawed back by the employer for any reason. Period.

The Legal Distinction Between Earned Wages and Advance Commissions

Now, what about that first payment, the one you get early or at the time of sale? That’s often referred to as an “advance commission.” And here’s where things get messy. Advance commissions aren’t earned wages because the deal hasn’t closed yet. You haven’t satisfied the conditions described in the commission plan. The company is essentially fronting you part of your commission so you can have a steady income while you’re waiting for deals to complete.

The law does allow employers to charge back advance commissions, but only under very specific conditions. The Commission Agreement must:

• Be in writing;
• Clearly and expressly identify any commission payments that are made as an advance;
• Use the word advance, not just “claw back” or “chargeback,” and
• Clearly and expressly list out the exact circumstances under which the advance may be clawed back/charged back by the employer from the employee’s subsequent paycheck.

If the commission plan doesn’t say “advance,” and if it doesn’t list the precise claw back/chargeback triggers, then the company cannot legally recover that money from the employee. Just calling it a “claw back” isn’t enough, but it’s very common.

Common Mistakes Employers Make in Commission Plans

And this is where most companies get it wrong. Many employers, even big companies, fail to properly define and structure the commission plan. They don’t use the right terminology, or they don’t list out the chargeback conditions, or they treat earned commissions as if they’re still advanced and not yet earned. That’s illegal.

Here’s how it happens many times: a national company that does business in 26 different states opens an operation in California and hires salespeople.  Because the company’s standard commission plan has been working like a charm in 26 different states, the company simply adopts the standard commission plan in California so everyone is earning commissions under the exact same plan.  The problem the employer inevitably will face is that the law in the other 26 states where business is booming don’t require the same sort of mandatory language that is required in California.  The company will point to every jurisdiction and declare: “we’ve never been sued over this in 20 years!”  And that could be true, but that is no excuse to violate California law.  As a result, uninformed employers wind up paying for it in litigation.

The first step in evaluating these cases is reviewing the commission agreement. You have to determine whether what the employer called an “advance” was actually structured as one under the law. If not, the employee may be entitled to recover the clawed-back amount as unpaid wages, plus penalties, interest, and attorney’s fees.

To understand how employers misuse commission agreements to claw back wages and what California law actually allows, read our in-depth guide Commission Chargebacks in California: The Great Rip-Off Scheme.

Element #10: Personal Involvement of Company Owner or C-Suite Executive

In California, if you want your claim to be eligible for an award of punitive damages, you must meet a specific legal requirement under California Civil Code section 3294. You need to show that the decision to terminate the employee was either:

• Made by an officer, director, or managing agent of the company, or
• Ratified or approved by someone at that level.

In other words, if some lower-level manager makes a bad call, the company might be liable for wrongful termination, but not for punitive damages. The law doesn’t let a massive company get tagged for punitive damages just because one of its local employees screwed up. There has to be personal involvement by someone who speaks for the company—someone high enough up the chain that their actions are the company’s actions.

Who qualifies? A C-suite executive like a CEO, CFO, or Chief Operating Officer. A director, meaning a member of the board of directors. Or a managing agent, which generally means a mid-to-high-level executive with authority over company-wide policies or operations.

If one of those people made the decision to fire the employee, or later approved it, then your claim potentially is eligible for punitive damages. Now, that doesn’t mean you’re automatically going to get them, but it gets you in the door.

And it matters. Because when the decision comes from the top, it signals that the company itself, not just a rogue manager, engaged in or condoned the wrongful conduct. That opens the door to greater liability and much more serious exposure for the employer.

On top of that, C-suite executives tend to take things more seriously. They understand risk. They know they’re in charge. If they’re the ones who made the call, they’re more likely to accept responsibility. And that can lead to better settlement leverage, earlier resolution, and more favorable outcomes at trial.

If the termination decision can be tied to the owner or a high-ranking executive, that’s a strong factor in your favor. It puts you in a position to pursue punitive damages, and that can significantly increase the value of the case.

Element #11: Termination with Low Prospects of Re-employment in Comparable Employment

In a wrongful termination case, one of the primary measures of damages is lost wages: what you would have earned had you not been fired. That includes both past wages (up to the time of trial) and, in some cases, future lost wages: what you reasonably would have earned if you’d stayed employed in that role or something similar.

Keep in mind that employees always have a duty to “mitigate damages.” That means you can’t just quit or get fired and sit around waiting for a big payout. You’re required to look for a comparable job as soon as possible. And if you find one that pays the same or more, then your claim for lost wages might disappear.

Comparable Employment Is About More Than Pay

Let’s say you were making $50,000, and the day after you were fired, you landed a new job that pays $100,000. You don’t have any lost wages. In fact, financially, you’re better off. But here’s where things get interesting.  Just because the salary is higher doesn’t mean the job is “comparable” and therefore lowers your lost wage damages.

Comparable means more than pay. It means same job duties, same industry, same prestige, same authority. If I was a senior executive at Exxon and got fired, and then went to manage a Chick-fil-A, even if it paid the same salary than Exxon, that’s not comparable employment. It’s a totally different job, different level of responsibility, different setting, etc. The income may be there, but the employment isn’t equivalent and therefore does not count towards lost wages damages.

The best cases are when someone is highly specialized—where there simply aren’t comparable jobs out there. Maybe the employee worked for a niche employer or had a rare skill set. In those cases, it may be very hard, or even impossible, to find a similar position. That dilemma increases the value of the case, especially when it comes to future lost wages.

Near-Retirement Terminations Can Multiply Damages

This issue frequently arises with people nearing retirement. If you’re 62 and planning to work until 65, and you get let go after 35 years on the job, you may not get another meaningful opportunity to work in comparable employment because of your age. That can significantly boost the damages calculation. It’s common in long-term employment where the employee is unexpectedly cut loose just a few years shy of retirement.

This argument can be compelling in a lawsuit because the burden of proving failure to mitigate is on the employer. It’s what we call an affirmative defense. That means the employer must prove you could have found a comparable job, and you didn’t. It’s not easy for them to prove. Sure, they can try to bring in a vocational rehabilitation expert to say, “this person could’ve found a comparable job in six months,” but they rarely do. Most don’t even bother. And when they don’t, that future lost wage claim stays alive.

When someone’s prospects for re-employment are low, and that includes age, skillset, job market, and job comparability, that can substantially increase the overall value of the case. You’re not just looking at what was lost. You’re projecting what will never be regained.

Element #12: A Claim for Quid Pro Quo Sexual Harassment

There are two forms of sexual harassment:  1) “Quid Pro Quo”; and 2) Environmental Harassment, also know as “hostile work environment” harassment.

“Quid Pro Quo” is a Latin phrase that means “something for something,” or the more modern usage: you scratch my back, and I will scratch yours.  Quid Pro Quo harassment is different from a hostile work environment because a claim for Quid Pro Quo harassment can involve only a single incident in which a superior employee either rewards or punishes a subordinate employee because the subordinate employee has complied or rejected the wrongdoer’s demand for sexual favors.

One of the defining characteristics of a Quid Pro Quo harassment is that it must always involve a superior employee rewarding/punishing a subordinate employee because that reporting relationship is what makes Quid Pro Quo claims very strong; it basically always involves the express or implied promise to “make your life easier at work,” but if you refuse the supervisor’s advances, guess what?  You’re fired.  Obviously, placing a subordinate employee in that position intrinsically is wrong, and also a very serious violation of the Fair Employment and Housing Act.

Why Quid Pro Quo Claims Are So Legally Powerful

Now here is what really seals the deal in almost every case involving a claim for Quid Pro Quo sexual harassment: under the FEHA, an employer is strictly liable for any alleged sexual harassment by a supervisor or manager.  “Strict liability” means if the supervisor engaged in the improper Quid Pro Quo conduct, the company always will be liable for that claim; in that particular scenario, one of the most common defenses is not available to the employer: lack of notice.

In a nutshell, it’s like this:  if a supervisor commits Quid Pro Quo harassment, the company automatically is liable even if no one at the company knew anything about it and it never actually was discussed in the workplace.  That’s a very significant difference, and a great one because the most common defense to a claim for hostile work environment harassment is that the company lacked notice of the alleged claim because the employee failed to use the internal complaint procedure to report the misconduct, or the employee reported but described something entirely different that was not workplace harassment.  None of that applies (or is even relevant) with a claim for Quid Pro Quo harassment, and that automatically gives an honest employee-plaintiff a very strong edge in the lawsuit.

For employees facing this kind of situation, understanding your rights and knowing how to respond in the moment is just as important as knowing the law—our blog How Should I Respond to Being Sexually Harassed? offers practical, step-by-step guidance.

Conclusion

After more than three decades representing employees across California, I have learned that not every bad experience at work makes a strong legal case. A truly strong employment lawsuit requires more than just hurt feelings or unfair treatment—it requires real, provable violations of law, credible plaintiffs, and defendants who can actually satisfy a judgment.

The twelve elements I have outlined here are not academic theories; they are the real-world factors that separate strong cases from weak ones. Whether you are an employee considering legal action, or a defense lawyer evaluating your company’s risk, understanding these elements can help you recognize when a case is likely to succeed, and what will limit a claim. In the end, successful employment litigation is not about who shouts the loudest; it is about who can tell the most credible, legally-supported story when it matters most.

Contact the Ruggles Law Firm at 916-758-8058 to Evaluate Your Potential Lawsuit

Matt Ruggles has a thorough understanding of California employment laws and decades of practical experience litigating employment law claims in California state and federal courts.  Using all of his knowledge and experience, Matt and his team can quickly evaluate your potential claim and give you realistic advice on what you can expect if you sue your former employer.

Contact the Ruggles Law Firm at 916-758-8058 for a free, no obligation consultation.

Blog posts are not legal advice and are for information purposes only.  Contact the Ruggles Law Firm for consideration of your individual circumstances.