In the state of California, how are commission and bonus payments handled for employees who terminate employment?

Commissions and bonuses are forms of wages in California. Under the Labor Code, wages must be paid within a specified time period after they are earned. Employees who quit or are terminated typically must be paid their final wages on their last day of employment to avoid possible penalties. However, when an employee's earned bonus or commission cannot be reasonably calculated at the end of the employment, an employer must pay the earned bonus or commission when it can be reasonably calculated.

In the event the commissions have been "earned" on or before the date of termination, the employer must complete the necessary calculations and pay the commissions on the date of the termination in the case of a discharge or a voluntary quit with more than a 72-hour prior notice, or within 72 hours of the termination of the employment relationship in the case of a voluntary quit without such prior notice. It is not permissible for the employer to wait until the customary time for calculating the commissions of current employees, nor is it permissible to delay payment of such earned commissions until the next regularly scheduled payday.

If the commission has not yet been earned at the time of termination and is awaiting the completion of some legal condition precedent--for example, receipt of the customer's payment--the commission must be paid to the employee immediately upon completion of the condition precedent.

If an employee is discharged before completing the terms of a bonus or commission, the employee may be entitled to recover at least a pro-rata share of the promised amount. If the employee resigns, he or she is entitled to a bonus only if continued employment is not a condition of payment and only if other applicable conditions are satisfied. However, there are different rules for the payment of commissions in such a situation.

Source: California Department of Industrial Relations and California Paydays, pay periods, and the final wages