What to do about an unfair compensation penalty?

I’m a Senior Manager for a small family business. I’m paid weekly a salary plus a small percentage of the weekly gross profit as a commission for performance of the company. Now my employer wants to penalize me by deducting money from my pay for lost revenue from lost customers and unserviced accounts. Since “I” really don’t have control over lost revenue because of service techs poor service, I don’t feel being deducted and paying a penalty is fair. Would my employers move to penalize me be legal?

Asked on September 1, 2012 under Employment Labor Law, California


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

If you had signed an agreement allowing your employer to debit your compensation for alleged lost revenue, such an agreement is, generally speaking, enforceable.

In the absence of an agreement like the above, the employer may not seek to hold you accountable for alleged lost revenue unless the employer can show you either deliberately caused the loss or at least were negligent (unreasonably careless) in causing it--and, if you did not choose to pay voluntarily, the employer would have to sue you and prove its case in court to recover the money. The employer may not, in the absence of something showing your agreement to having money withheld from your pay, take anything out of your pay without your consent.

However, what you need to bear in mind is that if you do not have an employment contract, you are an employee at will. As an employee at will, you could be fired at any time, for any reason--including that your employer believes you are causing it to lose money and are unwilling to bear  responsibility for the loss.

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