Scenario: Jane Smith is a former sales manager of Widget Inc., which sells data storage devices. Widget terminated Jane’s employment on Feb. 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 percent 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.