California Labor Law: Commission Pay Back?

Visalia, CAIn February 2007 Tim was hired as an agent for a freight brokerage company; he had a verbal agreement that work would take place partially in the office and partially outside the office. But Tim soon found out that verbal agreements don't count for much; now he wants to know if he has any recourse under the California labor law.

Only three weeks on the job, Tim's job description changed. "I would have the same job but I would also be assistant to the owner," says Tim, "and that lasted about six months."

The owner calculated that he would only pay a portion of Tim's salary: it dropped from $5,000 per month to $3,400. Tim was required to make up the difference by making commission on his own sales. But he had to undergo a "training program" for this new position and then he was required to work as an office employee for the owner: how was he supposed to make a sale? The owner told Tim to "Do what I say or you're outa here."

Tim also adds that deductions were not taken from his $3,400 monthly checks: no taxes or benefits.

Adding insult to injury, the owner told Tim that he wasn't able to keep him on as an assistant; that times were tight. This meant that Tim was only getting straight commission. "I would get my draw only if I brought in enough profit to cover it," says Tim. "But that changed too. I had a family issue and couldn't come into the office every day. That's when he fired me. To my surprise and shock, just last week I got a letter from a collection agency. The owner said that if I didn't pay back $5,100 and change within 30 days, it would be reported to the credit unions and would affect my credit.

How does he justify that? He said I was paid but didn't bring in any sales. It was the worst time of the year for sales, nobody was bringing in anything.

"I was paid 3,400 for six months as his assistant. Out of that $3,400, $2,200 was allocated to be his assistant. The remainder, ($1,200) was my responsibility—I had to come up with sales. In other words, he wants me to pay back the $1,200 multiplied by four, about four months of no sales--I was paid a commission before I made the sales.

But this is the clincher: If given the opportunity to stay, I would have been able to pay back this amount within a few weeks. I found employment at another firm one day after I was fired. That same day, he emailed this new firm telling them I owed him $5,000 and he was going to garnish my wages. Luckily my new employers did not return his email.

I have filed a complaint with the California labor board but would also like some legal advice. And I would like a letter sent to the owner, informing him that I have an attorney. Maybe he will back off."

Tim has several questions to ask an attorney. Specifically, does he have to repay the $5,100? And how much credibility does a verbal agreement have—Tim was hired as an agent but for six months he was an office assistant. Is the owner responsible for Tim's taxes and other benefits? And what about overtime? Working as an office assistant, he may not be classified as exempt.

If the owner wants to persue legal action and attempt to get back $5,000, he might want to seek legal advice first. It could turn out that he owes Tim. But a labor lawyer would know...