California severance negotiation is rarely straightforward for high-earning enterprise sales executives. When compensation is driven by commissions tied to large, long-cycle deals, severance discussions often intersect with disputes over earned commissions, clawback threats, and selectively rewritten compensation plans. Employers understand the leverage created by complexity, timing, and uncertainty, and they often use it to push executives toward accepting less than they should.
I’m Matt Ruggles, and I’ve been practicing employment law in California for more than 30 years. Over that time, I’ve negotiated hundreds of severance agreements for California executives and litigated commission clawback and unpaid commission claims, including disputes involving compensation in the seven figures. That experience matters because severance negotiations are not abstract. Employers evaluate risk, and that risk is shaped by what happens if negotiations fail and the dispute turns into litigation.
I wrote this case study because severance negotiation is something of a mystery for most executives who find themselves suddenly terminated and presented with an offer. That confusion is understandable. There is no standard playbook. Every executive is different. Every compensation structure is different. Every employer brings a different set of assumptions and pressure points to the table.
In this case study, I walk through a severance negotiation I handled recently. My hope is that reading through one successful example provides a clearer picture of what severance negotiation actually looks like and helps demystify the process for executives facing it themselves.
If you’ve just been fired and don’t know what to do next, read my post: I Just Got Fired: What Should I Do Right Away.
The Client: A Senior Enterprise Sales Executive Paid Primarily Through Commissions
Our client was a seasoned enterprise sales executive with years of experience closing complex, high-value deals. The role involved long sales cycles, sophisticated customer relationships, and contracts that routinely reached into the seven- and eight-figure range.
Like many enterprise sales professionals, the client’s compensation structure followed a familiar pattern:
- A relatively modest base salary
- Significant upside through commissions
- Variable compensation tied to bookings, renewals, and multi-year customer commitments
Over time, our client became one of the company’s top revenue producers (earning in excess of $1M annually). Commission payments regularly dwarfed base salary and reflected the value the client brought to the business.
That success, however, came with a hidden vulnerability: the company’s commission plans were dense, frequently revised, and drafted entirely by the employer.
Matt’s Legal Insight
In California, how a worker is paid matters just as much as how much they are paid. When commissions make up the bulk of compensation, employers often rely on complex plans to control payouts, but complexity does not excuse noncompliance. If compensation is promised, performed, and earned, the law treats it as wages, not a favor.
If you want to learn how to push for a better severance outcome, read my post: How to Maximize Your Severance Offer in California.
If you are a California executive facing severance negotiation and questions about unpaid commissions or clawbacks, get advice before you sign anything. Contact me at the Ruggles Law Firm at 916-758-0858 to discuss your situation and understand what leverage you may actually have.
The Commission Plan Problem: Constant Revisions Years Into the Relationship
Several years into the employment relationship, the company announced that it was “updating” or “restructuring” its commission plans. These changes were presented as forward-looking adjustments designed to align incentives with business goals.
In reality, the revisions had three major effects:
- They reduced commission percentages on large deals
- They delayed when commissions were deemed “earned”
- They introduced new language labeling commissions as “recoverable advances”
For deals already in the pipeline (deals our client had spent months or years developing) the revised plans substantially reduced expected income.
The company insisted these changes were permissible because commission plans are “not guaranteed” and subject to modification. That assertion became a central theme of the employer’s defense during severance negotiations.
Matt’s Legal Insight
Employers often claim commission plans can be changed at any time. That is only half true. In California, employers may modify commission plans prospectively, but they cannot lawfully apply new terms to work already performed or commissions already earned.
The Termination and the Shockingly Low Severance Offer
When the employment relationship ended, the company extended a severance offer that was far below what our client reasonably expected given seniority, performance, and earnings history.
The justification? According to the company:
- Many past commissions were allegedly “advances”
- Those advances were subject to chargebacks
- Once chargebacks were applied, the company claimed the client’s net earnings were far lower than they appeared
On that basis, the company argued that a modest severance payment was more than fair and hinted that it might even seek repayment of previously paid commissions.
This tactic put immediate pressure on our client. Few things are more unsettling than being told that money you earned, and already received, might suddenly be owed back.
Matt’s Legal Insight
One of the most powerful tools employers use in severance negotiations is fear. But in California, threats to claw back wages often expose employers to more liability, not less. Severance leverage cuts both ways.
If your employer says your severance offer is “non-negotiable,” read my blog: Non-Negotiable Severance in California: 5 Myths Dispelled By a Lawyer.
Why the Negotiation Was So Difficult for the Client
From the client’s perspective, the negotiation was exhausting and stressful. The stakes were high, the numbers were large, and the employer spoke with absolute confidence about its interpretation of the commission plans.
This is a common dynamic for high-earning employees:
- Employers control the documents
- Employers frame disputes as “contractual disagreements”
- Employees are told the law is unclear or unfavorable
Without experienced counsel, it would have been easy to assume the employer’s position was legally sound and accept the reduced offer.
If you want to understand the finer points of executive severance contracts, read my post: How to Negotiate Executive Severance Agreement Terms.
Matt’s Legal Insight
Sophisticated employees are often at a disadvantage because they assume sophistication equals fairness. In wage disputes, the opposite is often true. The more money involved, the more aggressively employers test the limits of the law.
Our First Step: Reconstructing the Commission History
Our representation began with a deep dive into every commission plan our client had worked under past and present. We reconstructed:
- Which plan applied to each deal
- When contractual milestones were met
- When commissions vested under the operative language
This timeline analysis revealed something critical: the company had retroactively applied revised commission terms to deals governed by earlier plans.
That retroactive application formed the foundation for the employer’s chargeback theory.
Matt’s Legal Insight
Commission disputes are rarely about one document. They are about timing. In California, the plan in effect when the employee performs the work, and satisfies the earning conditions, controls. Employers cannot rewrite that timeline after the fact.
If you want to steer clear of negotiation missteps, read my guide: How Do I Avoid Mistakes When Negotiating a Severance Agreement?
The Key Discovery: Earned Wages Disguised as “Advances”
As negotiations progressed, we uncovered the core legal flaw in the employer’s position. The company had labeled certain commission payments as “advances,” even though:
- The client had satisfied all earning conditions
- The deals had closed
- Revenue had been recognized
Under California law, once a commission is earned, it becomes a wage. Period.
Calling it an “advance” does not change its legal character, especially when the employee has already done everything required to earn it.
Matt’s Legal Insight
California courts look past labels and focus on substance. If compensation is earned, it is a wage. Employers cannot relabel wages as advances to manufacture clawback rights that never existed.
If you have been offered severance and are unsure whether it reflects what you are truly owed, I encourage you to get a clear, experienced assessment. You can reach me at the Ruggles Law Firm at 916-758-0858 to evaluate your severance and potential claims.
The Legal Exposure We Put on the Table
Once we framed the issue correctly, the employer’s risk became clear. Improper commission clawbacks can trigger:
- Claims for unpaid wages
- Waiting time penalties
- Interest and statutory penalties
- Attorneys’ fees and costs
Suddenly, what the company had treated as a routine severance negotiation looked much more like a wage-and-hour dispute with significant financial exposure.
Matt’s Legal Insight
Severance negotiations often conceal wage violations. When employers overreach on commissions, they convert what should be a clean exit into a liability event—sometimes a very expensive one.
In many California severance negotiations, leverage is not limited to wage-and-hour exposure. When the facts support it, claims under the California Fair Employment and Housing Act for discrimination or retaliation, or whistleblower retaliation claims under California Labor Code section 1102.5, can significantly increase an employer’s legal risk. These statutes carry the potential for uncapped damages, attorneys’ fees, and jury exposure. When a severance negotiation is backed by credible statutory claims, employers often reassess their positions quickly because the cost of being wrong is substantial.
If you want to learn how to use leverage to improve your severance deal, read my article: How To Use Leverage in Severance Negotiation.
The Turning Point in Negotiations
After we presented our analysis, the tone of negotiations shifted. The company walked back its most aggressive clawback positions and acknowledged that at least some commissions were indisputably earned.
That acknowledgment mattered. It undercut the company’s entire severance calculation and forced a reassessment of our client’s true earnings.
From there, the discussion moved from “minimal severance” to meaningful compensation reflecting:
- Actual commission earnings
- The risk of wage claims
- The cost of prolonged litigation
Matt’s Legal Insight
Negotiation leverage is not about bluster, it’s about exposure. When an employer realizes its legal position is weaker than advertised, resolution becomes possible.
The Result: More Than Triple the Initial Severance Offer
The final severance package was more than three times the company’s original offer. It included:
- A substantially increased severance payment
- Elimination of commission repayment demands
- A clean break without lingering wage disputes
Just as importantly, the resolution restored our client’s confidence and validated what they had known all along: the commissions were earned, and the company’s tactics were unjustified.
Matt’s Legal Insight
Strong outcomes come from strong positions. When the law is on your side, and you know how to use it, employers often choose resolution over risk.
Why This Case Matters for Commission-Based Executives
This case study reflects a broader reality for California sales professionals:
- Commission plans are frequently weaponized at termination
- Employers rely on ambiguity to reduce payouts
- Many executives leave money on the table by assuming nothing can be done
In truth, California law provides powerful protections for commission-based employees, if those protections are properly asserted.
Matt’s Legal Insight
Commission disputes are not niche issues. They sit squarely at the intersection of contract law and wage law, and California strongly favors employees when compensation has been earned.
If commission chargebacks feel unfair, there is often a legal reason they are. To learn more about this subject, read my blog: Commission Chargebacks in California: The Great Rip-Off Scheme.
Frequently Asked Questions About California Severance Negotiation
What is a California severance negotiation, and how is it different for executives?
A California severance negotiation involves negotiating the terms of a severance agreement after termination, often in exchange for a release of legal claims. For executives, the process is more complex. Compensation is frequently tied to commissions, bonuses, or equity, and severance negotiations often overlap with disputes over unpaid commissions or clawbacks. Employers evaluate risk differently when large compensation numbers are involved, which makes experienced negotiation critical.
If you’d like to know how employment lawyers approach severance deals, read my guide: How to Negotiate Severance Like an Employment Lawyer.
Can unpaid commissions increase leverage in a California severance negotiation?
Yes. Unpaid or disputed commissions can significantly increase leverage in a California severance negotiation. Under California law, earned commissions are treated as wages. When an employer attempts to withhold, claw back, or relabel earned commissions, it can create exposure for unpaid wages, penalties, and attorneys’ fees. That legal risk often becomes a key driver in improving severance terms.
If your commissions are unpaid or disputed, resolving the issue often depends on the written plan and the law. To learn more about this subject, read my blog: How Do I Resolve an Unpaid Commission Dispute in California?
How does executive severance negotiation in California differ from standard severance offers?
Executive severance negotiation in California is rarely a standard process. There is no uniform formula. Each negotiation depends on the executive’s role, compensation structure, termination circumstances, and potential legal exposure for the employer. Companies approach executive severance strategically, often minimizing offers unless legal leverage is clearly identified and presented.
Should I negotiate severance in California if I am a commission-based executive?
In many cases, yes. Commission-based executives negotiating severance in California often overlook unpaid commissions or improper clawbacks that can materially change the negotiation. Even when an employer presents a severance offer as “final,” that offer is frequently based on assumptions that can be challenged under California wage law. A proper analysis can reveal leverage that meaningfully improves severance outcomes.
If you want to avoid common pitfalls when negotiating your severance, read my post: 7 Employee Mistakes That Ruin Severance Negotiations.
Final Thoughts: Complexity Is Not a Defense
Employers often assume that complicated commission plans will shield them from accountability. This case proves the opposite. The more complex the plan, the more opportunity there is to expose unlawful retroactive changes, improper clawbacks, and wage violations.
For high-earning executives, severance negotiations are not just about severance, they are about earned pay. And earned pay, under California law, cannot be wished away.
In California, the concept is simple even when the paperwork is not: if you earned it, you own it. Employers can revise plans going forward, but they cannot rewrite history, and when they try, the law is firmly on the employee’s side.
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 evaluation.
Blog posts are not legal advice and are for information purposes only. Contact the Ruggles Law Firm for consideration of your individual circumstances.
