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The following is not meant to be legal advice. 

The California Court of Appeal confirmed the employer’s right to recover advanced commissions. In Koehl v. Verio, Inc., 142 Cal. App. 4th 1313 (Cal. App. 1st Dist. 2006), several former sales associates sued claiming that their employer’s recovery of commissions the employer had advanced to the employees was unlawful.

The issue for the California Court of Appeal  was whether the commissions were wages.  If they were wages, the charge backs would be unlawful under California Labor Code § 221. The California Court of Appeal agreed with the trial court.  The trial court determined that the commissions were not wages and entered judgment for the employer. The California Court of Appeal affirmed the trial court judgment for the employer.

The plaintiffs sold Internet services.  The plaintiffs were compensated with a base pay plus a commission for each sale. The commissions were paid when an order was “booked,” but the employer could “recover or charge back” the commission from the sales associates’ commissions (not base pay) if certain conditions were not met.