Recovering unpaid commissions is a legal right under California law, but most employees don’t know where to start. When employers refuse to pay commissions that have already been earned, it’s not a misunderstanding. It’s wage theft.
Matt Ruggles, a California employment attorney with over 30 years of experience, has helped employees across industries fight back against illegal chargebacks and recover the commissions they deserve. In this case study, you’ll learn how one top-performing salesperson reclaimed over $1,000,000 in unpaid commissions after his employer tried to retroactively change the rules. If you’re facing a similar situation, this blog explains how to protect your rights and recover what you’ve earned.
Introduction
When your employer refuses to pay commissions you’ve already earned, they are breaking California wage laws. It’s that simple. I’ve seen it happen repeatedly. Especially when it comes to commissions: companies change the rules after the fact, call your commissions “advances,” and claim you owe them money.
This is not a misunderstanding. Your employer is well aware of what they are doing. And if you try to fix it on your own, you will probably get steamrolled. Most employees wait too long, say the wrong things, or think they can negotiate with a company that already has made the decision to refuse to pay earned wages.
I wrote this blog to show exactly what it looks like to challenge an employer that thinks it can rewrite the rules and steal commissions from the people who earned them. My client was a top-producing salesperson with national accounts and a track record that spoke for itself. Despite consistently earning millions of dollars in commissions year after year, the company tried to retroactively change the compensation plan, withhold his pay, and demand he return hundreds of thousands of dollars he had already earned. We did not blink. We litigated aggressively, exposed the scheme for what it was, and recovered over $1,000,000 in unpaid commissions. The names have been changed for confidentiality, but the fight and the result are real.
How to Recover $1,000,000 in Unpaid Commissions in California: Case Study
Employee Background: Top Sales Rep Targeted for Commission Chargebacks
My client was a national account manager at a commercial services company selling enterprise-grade systems point-of-sale computer and communication systems to major restaurant and retail chains nationwide. Over a seven-year tenure, he climbed to the top, becoming the company’s highest-grossing salesperson. He worked on a base salary of $90,000, but his commissions ranged from $1 million to nearly $3 million annually, based on large-scale sales and installations. His commissions were based on the company’s written 2018 commission plan that expressly stated that commissions were “paid when earned” in two equal installments: 50% of the commission upon closing the sale, and 50% of the commission when the project was completed. Significantly, the company’s 2018 commission plan did not expressly classify the first commission payment as an “advance” payment, and did not include any express chargeback provision for the first commission payment if the project was not completed.
Nearly all of the client’s sales at the company under the 2018 commission plan were long-term accounts – what the company characterized as “significant projects” that included installations at hundreds of retails sites over many months or even years.
For more insight into how commissions work under California law, you may find these blogs helpful: “What is a Compensation Plan in California?,” “What is an Advanced Commission in California?,” and “What is a Commission Chargeback in California?”
Commission Dispute: Employer Demands $650,000 in Chargebacks from Employee
In 2022, the employer implemented a new commission policy, ostensibly to clean up its books ahead of a corporate acquisition. The new 2022 commission plan redefined the first commission payment as an “advance” subject to forfeiture (chargeback) if the installation wasn’t completed within 12 months. Instead of applying this policy to future deals, the company retroactively applied it to nearly all of my client’s existing contracts sold pursuant to the 2018 commission plan, including deals that had already been approved, executed, and partially paid pursuant to the 2018 commission plan that did not have any “advanced” commissions.
After doing a self-serving “audit” of my client’s sales applying the new 2022 commission plan, the company notified my client that he owed the company hundreds of thousands of dollars for his “significant projects” because they had taken more than 12 months to complete. As a result of this retroactive “reconciliation” of my client’s sales, the company my client a “bill” for nearly $650,000 in alleged chargebacks. Of course, the employer also began unilaterally making deductions from his ongoing commissions. Under the employer’s proposed repayment plan, he would have been required to keep working for them for eight more years just to pay off the debt! The company threatened termination after my client objected and refused to cooperate. When the company stopped paying him altogether based on the bogus bill, he had no other choice but to immediately resign his employment.
Initial Response: What the Employee Did Before Hiring a Lawyer
Before calling a lawyer, he did what most professionals would: he tried to resolve it internally. For several months, he attempted to negotiate with company management, explaining the problem and trying to find a reasonable solution that did not require him to pay back everything he had earned. His efforts went nowhere. After threatening to withhold his entire paycheck, he resigned, giving up a very lucrative job where he would have continued to earn millions of dollars every year.
If you’re trying to recover unpaid commissions and want a step-by-step breakdown of how to respond, negotiate, or sue, check out my companion blog: How Do I Resolve an Unpaid Commission Dispute in California?
Legal Action Begins: How We Responded to the Illegal Chargeback
Initially, we sent a detailed demand letter identifying the retroactive chargeback as an illegal wage deduction under California law. The company didn’t just ignore the letter, they doubled down. The company’s lawyers denied liability and threatened to countersue my client for the same $650,000 they had started clawing back immediately prior to his resignation.
Recovering unpaid commissions in California can be especially challenging when employers use commission chargebacks unfairly. For an in-depth case study, read my blog: Commission Chargebacks in California: The Great Rip-Off Scheme.
Establishing Liability: How We Proved the Commissions Were Earned
The key to the case was the same as it is in most commission disputes: the language in the applicable commission plan – in this case, the 2018 commission plan. The company’s defense hinged on the legality of the 2022 plan. But the plan itself wasn’t the problem and wasn’t illegal. However, how the company tried to apply the 2022 commission plan retroactively to commissions earned under the 2018 commission plan was entirely illegal and completely unjustified.
California law is clear: employers cannot retroactively change the terms of compensation once commissions are earned. That’s not a policy change. That’s wage theft. The client’s detailed documentation, including copies of the 2018 plan, internal communications, and sale timelines proved critical.
Legal Claims Filed: What We Alleged in Arbitration
Because of an arbitration clause in the employment agreement, we filed in arbitration and alleged claims for:
- Breach of contract
- Failure to pay wages
- Waiting time penalties under California Labor Code § 203
- Constructive wrongful termination
- California Labor Code penalties
Employer’s Defense: Denials, Threats, and Counterclaims
The employer denied everything. They claimed the employee quit voluntarily and was simply being held accountable for unearned advances. Then they escalated: they counter sued the employee for more than $650,000 in chargebacks, characterizing it as a debt owed to the company. The employer’s position was not only legally unsound, but it was also completely disconnected from their own documentation.
Discovery Strategy: How We Used Depositions to Uncover the Truth
We didn’t wait. We immediately began taking depositions starting with the client’s direct supervisor, then that person’s superior, the company’s president, and the finance employee who constructed the chargeback spreadsheet. We also deposed a former company president who had retired with a multimillion-dollar severance. That executive had no incentive to toe the company line and didn’t. He made key admissions that undermined the company’s entire narrative.
In response, the company tried to bury us in paper. For instance, an hour before a scheduled deposition, the company’s lawyer dumped more than 345,000 pages of irrelevant documents on us, part of a 500,000-page production designed purely to obstruct. It didn’t work.
Key Discovery Findings: Evidence That Helped in the Recovery of Unpaid Commissions
The depositions revealed that the company’s entire defense rested on a fiction: the idea that they had always applied the new plan retroactively. Under oath, this story didn’t hold up. Witnesses contradicted one another. The internal logic fell apart.
We also established that the retroactive chargeback wasn’t a one-off. It had been attempted with other employees, exposing the company to broader liability if we obtained a decision on the merits. That created a strategic leverage point. The longer they fought, the greater the risk we would obtain an adverse decision against them from which other employees might benefit.
Negotiation Strategy: How We Forced a Seven-Figure Settlement
We attempted mediation. It failed when we refused to even consider paying money to the employer. We were $1.5 million apart. But as arbitration hearing date approached, I knew the pressure was on.
At one point, I suspected the company’s attorneys weren’t accurately explaining the legal exposure to their client. To get things moving, I wrote a concise but pointed letter, not aimed at the lawyers, but clearly written for the company’s executives. I referenced deposition testimony, highlighted key inconsistencies, and even identified a scapegoat within their own leadership they could pin the blame on. That letter shifted the settlement landscape. Within days, they returned to the table ready to pay.
Settlement Outcome: Recovering Unpaid Commissions: A $1,000,000+ Outcome
We settled for over 125% of our original demand. The number is confidential, but it landed comfortably in the seven figures. From intake to resolution, the case took just under two years.
The client was actively involved in every decision. He maintained exceptional records, contributed strategic insights throughout the case, and ultimately walked away with a result that reflected the full value of his work.
Case Lessons: What Helped Us Win This California Commission Dispute
- The client kept meticulous records and understood the structure of his compensation.
- We acted fast and pushed aggressively through discovery instead of waiting out the clock.
- Depositions, not documents, broke the company’s defense.
- A precisely crafted demand letter reframed the risk in terms the employer couldn’t ignore.
FREQUENTLY ASKED QUESTIONS ABOUT RECOVERING UNPAID COMMISSIONS IN CALIFORNIA
What should I do if my employer is withholding commissions I’ve already earned?
First, don’t waste time negotiating on your own. Document the problem: keep copies of your commission plan, emails, and pay statements. Then, contact a lawyer who handles unpaid commission cases. California law is on your side: once a commission is earned, your employer can’t take it back or retroactively change the rules. Trying to “work it out” usually backfires because the company has already decided to withhold your pay.
Can my employer call my earned commissions an “advance” and demand I pay them back?
Not if they’ve already paid you commissions under a prior plan without an express chargeback clause. In California, commissions are wages once they are earned, and retroactively changing your pay terms is illegal. If your employer is suddenly calling earned commissions “advances,” you likely have a strong legal claim. Get legal advice immediately.
What if my employer makes me a repayment demand or starts deducting from my paycheck?
This is wage theft under California law. You should immediately demand an explanation in writing, then consult a lawyer. Do not agree to a repayment plan or sign anything without legal review. If they’re deducting pay without your authorization, that’s likely a Labor Code violation and can trigger penalties, including waiting time penalties.
How can I build a strong case to recover unpaid commissions?
Here’s what you need:
- A copy of your commission plan(s) that show when commissions are earned.
- Pay statements showing the amounts paid and any deductions.
- Emails, sales records, and internal communications proving you completed your work.
- Documentation of any retroactive changes your employer tried to impose.
Then, hire a lawyer who knows California commission law. The right lawyer will pressure the employer, expose their legal risk, and push for a full recovery including unpaid commissions, penalties, and attorney’s fees.
Final Thoughts About Litigating an Unpaid Commission Dispute
When you’ve spent years building a book of business, landing national accounts, and earning big commissions, it’s gut-wrenching to realize your employer is trying to take it all back. I’ve seen the emotional toll it takes. People hesitate to call a lawyer because they still feel some loyalty to the company or they’re afraid it’ll look like sour grapes.
But here’s the truth: when your employer retroactively rewrites the rules to claw back money you already earned, that’s not a misunderstanding. That’s theft. California law is on your side, and you have every right to fight back.
I’ve helped many employees through this situation, and it’s never easy. But the moment you decide to stop tolerating it, you’re no longer stuck. There’s a path forward. You don’t have to let them get away with it and you’re not alone.
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.
