03/11/2010
Post-Employment Sales Commissions in California: Guidance from the California Supreme Court in Schachter v. Citigroup (Law.com)
Scenario: Jane Smith is a former sales manager of Widget, Inc., which sells data storage devices. Widget terminated Jane's employment on February 1, 2010. Three weeks later, Widget closed a $5 million sale to BigBuy, Inc., Jane's biggest account. BigBuy signed a preliminary purchase order for the sale in January 2010, before Jane left Widget. Jane claims she is entitled to a 2% commission on the sale under her employment contract, and demands Widget pay her a post-termination commission of $100,000. Is Widget obligated to pay Jane the commission under California law?
The answer has critical importance, not only to guide employees and employers in making and responding to such claims, but also to help companies craft enforceable employment contracts and commission plans to address this issue. Yet, California law contains surprisingly little clarity in this area of law.
The recent decision Schachter v. Citigroup, is the first California Supreme Court case to address the question of post-employment sales commissions. The Court's guidance is necessary because both existing case law, and interpretations from the California Department of Labor Standards Enforcement ("DLSE"), have not provided a clear, consistent or well-founded framework.
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