California Labor Code section 200 defines wages broadly enough to include commissions earned under a written commission agreement. That means an unpaid commission is not a contract dispute to be quietly negotiated. It is a wage claim, subject to the same statutory penalties, attorney's fee provisions, and Labor Commissioner enforcement mechanisms that apply to unpaid hourly or salary wages.

SB 261 significantly increases the risk for employers who allow a wage judgment, including a commission judgment obtained through the Labor Commissioner or a civil lawsuit, to go unsatisfied. Courts may now impose a penalty of up to three times the unpaid judgment, plus interest, if the judgment remains unsatisfied 180 days after the appeal period has lapsed. Courts are required to assess that full penalty unless the employer proves, by clear and convincing evidence, that good cause exists to reduce it.

The law also makes attorney's fees mandatory for prevailing employees in enforcement actions, whether brought by the employee, the Labor Commissioner, or a public prosecutor. Any penalty recovered is split evenly: half to the affected employee, half to the Division of Labor Standards Enforcement for further enforcement.

Critically, SB 261 extends joint and several liability for these penalties to successor employers, so a business reorganization, sale, or rebrand does not erase a predecessor's unpaid wage liability.

Commission disputes in Silicon Valley tend to fall into a handful of recurring patterns: termination shortly before a large commission is scheduled to pay out, a mid-year change to the compensation plan that retroactively reduces already-earned commissions, vague clawback provisions invoked after a client cancels or a deal unwinds, and commissions withheld or forfeited in connection with a layoff.

In each scenario, the central legal question is the same: under the terms of the written commission agreement in effect when the sale closed, was the commission earned? If so, a later policy change, termination, or layoff generally cannot unwind it.

Employers sometimes attempt to withhold commissions on transactions that close after an employee's termination date, or to invoke a clawback clause that was never clearly disclosed at the time the commission was earned. California courts and the Labor Commissioner scrutinize these provisions closely, and ambiguous or after-the-fact clawback language is frequently construed against the employer that drafted it.

Employees who are laid off in the current wave of Silicon Valley workforce reductions should not assume that a pending commission is forfeited simply because their employment has ended. If the commission was earned under the governing agreement before termination, it is due as part of final wages.

Employees who believe they are owed unpaid commissions should preserve their written commission agreement, any compensation plan revisions, and records of closed deals or transactions. Given the significantly increased exposure SB 261 creates for employers, many disputes that previously dragged on for months now resolve more quickly once the employer's counsel understands the potential penalty. McLellan Law Group represents commissioned employees throughout Silicon Valley, San Jose, Cupertino, and Santa Clara County in unpaid wage and commission disputes.