Commission-Only Pay in California
What Employers Need to Know
Many employers ask whether they can pay employees on a commission-only basis. In California, this is rarely an option unless the employee falls under a narrow exemption.
The General Rule
Commission-only pay is not a valid structure for most employees. Unless an exemption applies, employees must still receive minimum wage, overtime, and meal and rest breaks protections. Paying “commission-only” without these guarantees and protections violates California’s wage and hour laws.
The Exception: Outside Sales
The only true commission-only option is for outside sales employees, who:
Spend more than 50% of their working time away from the employer’s place of business.
Primarily make sales or obtain orders/contracts.
Outside sales employees are exempt from minimum wage, overtime, and meal/rest break requirements.
Commissioned Inside Sales
While California does recognize a limited exemption for inside sales employees, it only applies in certain Wage Orders and is tightly restricted. Employers considering this model must carefully review industry-specific requirements and confirm compliance.
If you are considering a commission-only pay structure, be cautious. Most employees in California must receive minimum wage, overtime, and meal and rest break protections. Chapman Employment Law can help you evaluate whether a commission-only structure is lawful for your business and design compliant compensation plans.
