Employees paid on commission face a frustrating and uniquely unfair problem: illegal commission chargebacks. These occur when an employer deducts money from your paycheck, money you believe you’ve earned, claiming they’re “reversing” a commission for a deal that fell through or didn’t meet some internal condition. Often, there’s no warning, no explanation, and no clear basis for the deduction.
I’m Matt Ruggles, and I’ve been practicing employment law in California for over 30 years. I’ve represented employees in every major industry, retail, commercial sales, tech, pharmaceuticals, real estate, mortgage banking, and even executives at the top of the corporate ladder. I’ve seen just about every kind of commission plan and just about every trick employers use to claw back money they have no legal right to take.
This blog lays out the same method I use when reviewing, analyzing, and resolving commission disputes. If you follow these steps, your odds of getting your money back go up significantly.
Step #1: Identify the Illegal Commission Chargebacks
Let’s start with the basics: under California law, every commission plan must be in writing. Your employer is legally required to put all the terms and conditions of how commissions are earned and paid into a written plan and give you a copy.
Why does this matter? Because the legality of a chargeback hinges on whether the commission was advanced or earned. Only advanced commissions can legally be charged back. Once a commission becomes “earned,” it becomes earned wages and earned wages can’t be clawed back, period, unless you give written consent.
Here’s what that means in plain terms:
- If your commission plan says a payment is “earned” once a sale closes, or a client pays, or any other specific event occurs, the employer can’t later take it back.
- If your plan tries to call something “earned” and also subject to chargeback, it’s garbage. That’s illegal under California law.
A few more things to look for:
- Get the commission plan that was in effect when you earned the commission. Many employers change plans yearly, and applying new rules to past commissions is always illegal.
- Review your employee handbook and your commission plan closely. You’re looking for:
- Any language describing commissions as “advanced”
- Any clause about “chargebacks” or “clawbacks”
Read it all carefully. Most employers bank on the fact that you won’t.
Step 2: Prepare a Written Request Challenging the Chargeback
Once you’ve confirmed that a chargeback was improper, draft a written request to the employer. Keep it simple. Avoid emotion. This is a professional dispute over money you’ve earned.
In your message, briefly explain:
- Why the commission chargeback is improper (based on the language in your commission plan)
- That the payment was earned wages under California law
- That earned wages cannot be deducted or clawed back without written authorization
Use the phrase “earned wages,” not “earned commissions.” That distinction matters. California law treats earned wages as sacrosanct and unauthorized deductions from wages are flat-out illegal under Labor Code § 221.
Send the request via email. Keep every communication in writing. Don’t exaggerate the harm, don’t talk about “emotional distress,” and don’t rant. Just state the facts and ask for repayment. This may take a few weeks, so stay patient, but persistent.
Sample Message
Subject: Request for Reinstatement of Improper Commission Deduction
Hi [Manager/HR’s Name],
I’m writing to request repayment of the commission that was deducted from my recent paycheck dated [insert date]. Based on my review of the commission plan, this payment was not an advance and was fully earned under the terms in place at the time.
Under California Labor Code § 221, earned wages cannot be deducted or clawed back without express written authorization. Since I did not authorize this deduction and the commission was earned, I believe the chargeback was improper and should be reversed.
Please let me know when I can expect repayment or if you need additional information. I’m hoping to resolve this quickly and informally.
Best regards,
[Your Full Name]
[Your Job Title]
[Your Contact Information]
Step 3: Negotiate With the Employer to Get Paid for Illegal Commission Chargebacks
If the employer admits that the chargeback was improper, do not negotiate down that amount. Once they acknowledge it, their obligation to pay you is absolute.
Continue all communication in writing. If they offer clarification about how chargebacks should be handled in the future, request that this be incorporated into the commission plan in writing. That way, they don’t get to play fast and loose again later.
Don’t settle for a vague verbal promise or a handshake deal.
If you want to learn how to resolve an unpaid commission dispute the right way under California law, read my blog: How Do I Resolve an Unpaid Commission Dispute in California?
Step 4: Contact a Qualified Employment Lawyer
If the employer won’t budge, or continues to deduct money that shouldn’t be touched, it’s time to escalate. A qualified California employment lawyer, preferably one who handles commission disputes regularly, can force the issue.
You’ve done the legwork by:
- Getting the plan in writing
- Identifying what’s “earned” vs. “advanced”
- Documenting your objections professionally
Now it’s time to let an attorney bring the leverage. Most of us handle these cases on a contingency basis, meaning no upfront cost to you.
If you’re not sure how to choose the right legal help, read my blog: How Do I Select a California Employment Lawyer? It breaks down what to look for, what to avoid, and how to make sure you’re hiring someone who actually knows what they’re doing.
FREQUENTLY ASKED QUESTIONS ABOUT ILLEGAL COMMISSION CHARGEBACKS
What is an illegal commission chargeback in California?
An illegal commission chargeback occurs when your employer deducts money from your paycheck for a commission that you already earned. Under California law, earned commissions are considered wages, and wages cannot be clawed back without your express written agreement. If the commission wasn’t labeled as an “advance” and the deduction wasn’t authorized in your commission plan, the chargeback is likely illegal.
Can my employer take back commissions if the client cancels or doesn’t pay?
Not unless your written commission agreement clearly defines the commission as an advance and spells out the specific conditions for repayment. Once a commission becomes earned, it becomes a wage and California law strictly prohibits employers from taking back earned wages, even if the deal falls through.
How do I know if my commission was considered an advance?
You’ll need to review your written commission plan. Under California law, all commission agreements must be in writing. If the plan explicitly refers to certain payments as “advances” and lays out clear conditions for repayment, your employer may be allowed to issue a chargeback. But if the plan is silent or vague, the commission is presumed earned and cannot legally be deducted.
What should I do if I believe a commission chargeback was illegal?
Start by gathering your commission plan, pay stubs, and any relevant communication. Then write a clear, professional email to your employer explaining why the deduction was improper. Refer to the payment as “earned wages” and cite California Labor Code § 221. If that doesn’t resolve the issue, consider filing a complaint with the California Labor Commissioner or contacting a qualified employment attorney.
Are chargebacks allowed under California law if I signed a commission plan?
Only if the commission plan clearly and lawfully authorizes the chargeback. Employers often try to include vague or misleading language, but California courts closely scrutinize commission agreements. A commission can’t be “earned” and “subject to chargeback” at the same time—that contradiction makes the chargeback illegal.
Final Thoughts from Matt Ruggles About Fighting Illegal Commission Chargebacks
Commission chargebacks are one of the most abused tactics employers use to skim money off the backs of their own employees. If your employer has taken back commissions you believe you earned, don’t assume they’re allowed to. In many cases, they aren’t.
California law is clear: once a commission becomes earned, it becomes a wage. And employers who deduct wages without consent are violating the law.
If that’s happening to you, fight back calmly, methodically, and with the right help.
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.
