Commission Plans - Chargebacks and Forfeitures

As shown in Koehl v. Verio, the courts in recent times are more likely to enforce clear provisions in commission plans permitting employers to recover advanced commissions and bonuses. The language must be clear, and there must be a rationale for the advances and chargebacks. The key is to define when commissions are "earned," e.g., when payment is received, after a certain stage of the installation / serving process etc. The Court in Koehl relied in part on recent court decisions upholding such arrangements, as well as the California Division of Labor Standards Enforcement's "Enforcement and Interpretations Manual."

This opinion is thoroughly reasoned, including a comprehensive discussion of related case law. It can help employers and their lawyers draft lawful commission plans that permit sales employees to benefit from early cash flow without receiving windfalls from overpaid commissions. Yes, even in California.

DGV