Fired Before a Commission, Bonus or RSU Payout in California: When It Is Bad Faith

If you were fired before a commission or bonus was paid, California treats the part you already earned as wages. Your employer must pay it at the firing, whatever the reason. Pay not yet earned is harder. For a bonus not yet payable, a California appeals court has expressly left open what happens when an employee is fired for the specific purpose of depriving them of their rights under the bonus plan. A claim brought as a breach of the implied covenant of good faith pays contract damages only. We found no California appeals court decision on firing someone to stop RSUs vesting.

At a glance

• Earned means every condition in your plan was met before the firing.
• An earned commission or bonus is a wage, due immediately when you are fired.
• Firing someone to avoid paying earned commissions can support a wrongful termination claim.
• For pay not yet earned, your plan's wording decides most of the case.
• Unvested RSUs are the hardest version. We found no California appellate case that decides them.
• If you asked for unpaid wages and were fired within 90 days, the law gives you a rebuttable presumption.

Does your payout survive the firing?

Start with what you were owed on the day you were let go. The answer turns on whether the pay was earned under your plan's own conditions.

Read the plan first, because the plan sets the conditions. If your question is whether a plan can lawfully make you stay employed until the payout date, our commission agreement guide covers that clause: can a plan make you stay employed until the payout date?

What does this firm mean by bad faith?

Jonathan Delshad describes the case the firm goes after this way. An employer sees a big commission check coming, then finds an excuse to fire the person so it does not have to pay out the commission. The firm calls that bad faith. He says it sometimes happens with RSUs (stock awards), where a company would rather fire someone than pay out a big stock award.

The legal words for that idea come from the implied covenant of good faith and fair dealing. That is a promise the law reads into every contract, including an employment contract. Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317 describes its job: it "exists merely to prevent one contracting party from unfairly frustrating the other party's right to receive the benefits of the agreement actually made."

In footnote 18 of Guz, the California Supreme Court described when a firing might breach the covenant: "the covenant might be violated if termination of an at-will employee was a mere pretext to cheat the worker out of another contract benefit to which the employee was clearly entitled, such as compensation already earned." The next sentence is "We confront no such claim here."

That footnote is the opening, and it comes with four limits:

1. It says the covenant "might be violated." It does not say a pretextual firing always breaches it.
2. Its example is compensation already earned. Earned pay is protected as wages anyway.
3. The benefit has to be one you were clearly entitled to under the contract.
4. The covenant pays contract damages only. Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654 held that "breach of the covenant may give rise to contract but not tort damages."

Guz also limits what the covenant can do for an at-will employee: "If an employment is at will, and thus allows either party to terminate for any or no reason, the implied covenant cannot decree otherwise." So bad faith is a claim about the pay your contract promised. It does not stop an at-will firing. For where at-will employment ends, see our guide to at-will employment and wrongful termination.

Is an earned commission owed even if you were fired?

Yes. Labor Code section 200 defines wages to include amounts for labor "whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculation." The California Supreme Court added in Schachter v. Citigroup, Inc. (2009) 47 Cal.4th 610 that "Incentive compensation, such as bonuses and profit-sharing plans, also constitutes wages."

The timing rule is in Labor Code section 201(a): "If an employer discharges an employee, the wages earned and unpaid at the time of discharge are due and payable immediately." The Labor Commissioner's paydays FAQ applies that to commissions: "It is not permissible for the employer to wait until the customary time for calculating the commissions of current employees".

A commission waiting on one last step is not lost either. The same FAQ says that if the commission "is awaiting the completion of some legal condition precedent, for example, receipt of the customer's payment, the commission must be paid to you immediately upon completion of the condition precedent." A condition precedent is something that must happen before pay is owed.

Three more rules give an earned commission claim its weight:

• Penalty. Under Labor Code section 203(a), if an employer "willfully fails to pay" final wages, they continue as a penalty for up to 30 days. The Labor Commissioner says no penalty applies where there is a good-faith dispute, meaning a defense that, if it succeeded, would defeat the wage claim entirely. A defense with no evidence behind it, an unreasonable one or one raised in bad faith does not count. Even when a dispute is genuine, the employer must pay whatever wages are due and not in dispute.
• Interest. Labor Code section 218.6 requires the court to award interest on unpaid wages, at the 10 percent rate set by Civil Code section 3289(b).
• Fees. In a court wage action, Labor Code section 218.5 awards reasonable fees to the winning party if fees are requested when the case starts. An employer that wins gets fees only if the court finds the employee sued in bad faith.

A plan cannot sign away earned pay. Labor Code section 219(a) says these wage rules cannot "be contravened or set aside by a private agreement, whether written, oral, or implied."

Jonathan Delshad calls unpaid commissions very common in California, and an area of law he loves to work in. For the full rules on when a commission is earned and when it must be paid after you leave, see our unpaid commissions guide and our California final paycheck guide.

Is it illegal to fire someone to avoid paying an earned commission?

It can be wrongful termination. In Gould v. Maryland Sound Industries, Inc. (1995) 31 Cal.App.4th 1137, a commissioned sales representative alleged he was fired to avoid paying commissions he had earned. The Court of Appeal held: "if MSI discharged Gould in order to avoid paying him the commissions, vacation pay, and other amounts he had earned, it violated a fundamental public policy of this state."

That makes it a Tameny claim, named after Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167. Tameny lets an employee fired in violation of fundamental public policy "maintain a tort action and recover damages traditionally available in such actions." Phillips v. Gemini Moving Specialists (1998) 63 Cal.App.4th 563 later repeated Gould's rule that "the prompt payment of wages due an employee is a fundamental public policy of this state."

Gould has three limits:

• It was decided at the pleading stage. The court accepted the allegations as true. Nobody had proved anything yet.
• It covers pay the employee had already earned. It is not authority for a payout that was still in the future.
• Gould's covenant claim, which argued he was fired without good cause, failed in the same opinion. The court said the covenant "does not transform a terminable-at-will employment contract into a terminable-only-for-good-cause contract."

Gould also answered an objection. Firing someone does not cancel earned wages, because they become due at once. The court agreed the motive "seems illogical," but said the tort is committed "regardless of whether the discharge actually accomplishes the unlawful purpose." In practice, the facts have to explain why the employer fired anyway. It may have bet the employee would not pursue the money, or it may dispute that the pay was earned.

For the wider picture, see our guide to what makes a firing wrongful in California.

What if the commission or bonus was not yet earned?

This is the fact pattern Jonathan Delshad describes, and the law is less settled. One California appeals court has expressly declined to decide it for a bonus, and the California Supreme Court left a related question open.

Guz footnote 18, quoted above, is where the Supreme Court left that related question open. On a pretextual firing, it went no further than saying the covenant "might be violated", its example is pay already earned, and the court said it confronted no such claim. Neisendorf v. Levi Strauss & Co. (2006) 143 Cal.App.4th 509 reserved the bad-faith question for a bonus that was not yet payable. In footnote 10, the court said: "We express no opinion on whether the result would be same in this case if the jury found Neisendorf was wrongfully discharged." The same footnote adds that "the question of fraud or bad faith is not before us, because there is no allegation Neisendorf was discharged for the specific purpose of depriving her of whatever rights she had acquired in the bonus plans."

The arguments for an employee come from three places.

The contract rule against prevention. Civil Code section 1512 says: "If the performance of an obligation be prevented by the creditor, the debtor is entitled to all the benefits which he would have obtained if it had been performed by both parties." Civil Code section 1442 adds that "A condition involving a forfeiture must be strictly interpreted against the party for whose benefit it is created." No case we read applied section 1512 by name to a commission or bonus firing. It states the principle.

The Labor Commissioner's manual. For commissions, it says a fired employee "may be able to recover all or a pro rata share of the commissions." For bonuses, it says an employee discharged without valid cause "may be entitled to recover at least a pro-rata share of the promised bonus." The manual is agency guidance, not binding law, and the opinion letter it relies on is more guarded. The letter says the agency takes partial bonus claims "on a case-by-case basis."

Schachter's plan. Schachter quit before his restricted stock vested, and he lost. The court upheld the forfeiture "because no earned wages remain unpaid upon termination for cause or resignation." If he had been fired without cause, the plan would still have taken the stock, but it would have refunded in cash, without interest, the pay he had put into it. The court said that term "is consistent with contract law principles prohibiting efforts by one party to a contract to prevent completion by the other party." That is a comment on a plan term the court approved. It is not a holding that a firing before vesting is unlawful.

The employer's side has support too. Schachter says incentive pay is earned only when the employee meets the plan's conditions, "which often includes remaining employed for a particular period of time." Neisendorf's plan required her to be "an active employee of the company on the payment date," and she was fired for cause before the payout. The court found nothing in California wage policy "that transforms Neisendorf's contingent expectation of receiving bonuses into an entitlement."

So for unearned pay, look at three things: what the plan says happens on a firing without cause, whether the stated cause holds up, and how close you were to meeting every condition.

When is a bonus a wage, and when is it discretionary?

A promised bonus becomes a wage once you meet its conditions. Neisendorf puts it this way: "once a bonus has been promised as part of the compensation for service, and the employee fulfills all the agreed-to conditions, the promised bonus is considered wages that must be paid."

The labels discretionary and non-discretionary do not settle it on their own. What counts is whether there was a promise tied to objective conditions, and whether you met them.

• A truly discretionary bonus. The Labor Commissioner's manual says bonuses "which are completely discretionary, based on no objective criteria and are not routine" do not create an implied bonus contract.
• A bonus paid every year. The manual says "regular payment of the bonus in past years may ripen into an implied contract for compensation in the absence of a specific contract." It also requires "some objective criteria upon which the bonus is based."
• If you quit before the payout. In Lucian v. All States Trucking Co. (1981) 116 Cal.App.3d 972, the court held that "an employee who voluntarily leaves his employment before the bonus calculation date is not entitled to receive it." That was a resignation case.

One layoff case produced a pro rata result. In Division of Labor Law Enforcement v. Transpacific Transportation Co. (1979) 88 Cal.App.3d 823, the company had paid a yearly bonus since 1941. It laid off employees shortly before the payout and paid nothing to them. The court held: "The law does not support a forfeiture in these circumstances where the employees were terminated through no fault of their own after having substantially performed the services entitling them to a bonus." The employees won on estoppel, based on the company's conduct, with no written plan and no stated condition of being on the payroll. So the case is not authority that a clear written clause is void.

What happens to RSUs or stock options if you are fired before they vest?

This is the hardest version. We found no California appellate case deciding whether firing an employee to stop restricted stock units (RSUs) from vesting is unlawful, a covenant breach or a wage violation. A case-law search of California's appellate courts for restricted stock units, and searches pairing the implied covenant with vesting, returned no such decision.

Here is what the cases do say, and each one is about a different kind of equity:

• Restricted stock. Schachter agreed, on a point the employer conceded, that restricted stock issued to the employee "also constituted a wage." It still upheld the forfeiture, because nothing had been earned under the plan.
• Stock options. Shah v. Skillz Inc. (2024) Cal. Ct. App. No. A165372 held that "stock options are not wages under the Labor Code." It relied on International Business Machines Corp. v. Bajorek (9th Cir. 1999) 191 F.3d 1033, which said options "are not money at all. They are contractual rights to buy shares of stock."
• RSUs. No California appellate decision we read says whether RSUs are wages. On the cases we read, that question is open.

The only case we read on a firing alleged to block vesting went against the employee. In Salsgiver v. America Online, Inc. (C.D. Cal. 2000) 147 F.Supp.2d 1022, the employee alleged he was fired "in order to avoid having to vest the remaining option grants." The federal court dismissed the covenant claim with prejudice. It is one federal trial court, and it does not bind California courts. It also did not discuss Guz footnote 18.

Vested equity is different. In Shah, the plan let a for-cause firing cancel vested options. The jury found Skillz breached its contracts "by not allowing Shah to exercise his vested stock options under the pretext that 'cause' existed for his termination." The Court of Appeal ordered a new judgment of $6,694,000 and said: "By declining to find that stock options are wages under the Labor Code, we do not leave employees who are wrongfully denied their options without recourse."

So the grant agreement is the first document to read. It sets the vesting schedule and what happens on a firing with or without cause. Salsgiver noted that employees can negotiate "for some or all of the promised options to continue to vest even after termination."

Watch the governing-law clause. An equity plan may say another state's law governs it. The Skillz plan chose Delaware. Labor Code section 925(a) bars an employer from requiring an employee who primarily resides and works in California, "as a condition of employment," to agree to a clause that would "Deprive the employee of the substantive protection of California law with respect to a controversy arising in California". It covers contracts entered into, modified or extended on or after January 1, 2017. It does not cover an employee who had a lawyer negotiate the clause. Whether an equity grant counts as a condition of employment is a question no source we read answers.

What if you were fired after asking about your commission?

Then retaliation law may also apply. Labor Code section 98.6(a) bars firing an employee who "made a written or oral complaint that they are owed unpaid wages". Under Labor Code section 98.6(b)(1), "If an employer engages in any action prohibited by this section within 90 days of the protected activity specified in this section, there shall be a rebuttable presumption in favor of the employee's claim."

The 90 days run from your complaint, not from the payout date. A firing timed before a payout is not protected activity by itself. The presumption applies if you first asked, in writing or out loud, for pay you were owed and were fired within 90 days. The employer can still rebut it.

The same section gives reinstatement and "reimbursement for lost wages and work benefits caused by those acts of the employer." Labor Code section 98.6(b)(3) adds a civil penalty "not exceeding ten thousand dollars ($10,000) per employee for each violation of this section," paid to the employee.

Labor Code section 1102.5 protects reporting what you reasonably believe is a violation of law to someone with authority to correct it. Once that report is shown to be a contributing factor in the firing, Labor Code section 1102.6 makes the employer prove "by clear and convincing evidence that the alleged action would have occurred for legitimate, independent reasons". For more, see our guide to California workplace retaliation laws.

Ready to talk it through?

If you were let go shortly before a commission, bonus or stock award was due, a lawyer can read your plan and the timeline with you. Tell us what happened.

What evidence matters in a bad-faith firing case?

The cases turned on timing, the plan's wording and whether the stated reason for the firing held up. Gather these before you talk to a lawyer:

1. The signed plan. Get the commission plan, bonus plan or equity award, including the clause that says when pay is earned or vests. For a commission plan, Labor Code section 2751(b) requires the employer to "give a signed copy of the contract to every employee who is a party thereto". Bonus plans are outside that rule unless the employer offered a fixed percentage of sales or profits as pay for the work. If you signed a bonus plan or equity award as part of the job, ask for a copy. Labor Code section 432, below, may give you that right. A missing signature is not a case on its own. The plan matters as evidence of what you were owed.
2. The dates. Write down the payout or vesting date, the date you were told you were fired, and your last day.
3. Proof the conditions were met. Closed deals, invoices, quota reports and customer payments show what was earned.
4. Payment history. Pay stubs and records of past bonuses and commissions show a pattern. The Labor Commissioner's wage-claim page tells claimants to "Keep all your pay stubs".
5. Any written request for pay. An email asking for a commission that was due, with its date, may start the 90-day clock for the presumption.
6. The stated reason. Keep performance reviews and the termination letter. Shah turned on a cause the jury found was a pretext.
7. Your personnel file. Labor Code section 1198.5(a)(1) gives current and former employees "the right to inspect and receive a copy of the personnel records". Labor Code section 432 says an employee who signs "any instrument relating to the obtaining or holding of employment" shall be given a copy on request.

What can you recover?

What you can recover depends on the claim.

Interest at 10 percent applies in a court action and to a Labor Commissioner award. The section 218.5 fee rule applies in court. On motive, Foley says it "generally has no bearing on the scope of damages that the injured party may recover for the breach of the implied covenant".

Should you go to the Labor Commissioner or to court?

A Labor Commissioner wage claim is a route for the unpaid commission or bonus itself. Our guide explains how to file a California Labor Board wage claim, step by step. Under Labor Code section 98.2(a), either side can appeal the decision to the superior court within 10 days after notice of it is served, "where the appeal shall be heard de novo," meaning a fresh hearing. Under Labor Code section 98.2(b), an employer that appeals must first post an undertaking in the amount of the award.

Covenant, wrongful termination and equity contract claims are generally court claims. Our unpaid wages lawyer page explains how the firm handles wage cases. A retaliation complaint can go to the Labor Commissioner under Labor Code section 98.7. Which route fits your case is a question for a lawyer, because a wage claim and a firing claim can follow different paths.

How long do you have to act?

Several clocks can run at once, and each claim has its own.

Under Labor Code section 98.7(a)(1), a retaliation complaint must be filed "within one year after the occurrence of the violation," and the period "may be extended for good cause." For a Tameny claim, the Court of Appeal in Prue v. Brady Co./San Diego, Inc. (2015) 242 Cal.App.4th 1367 held that the two-year period in Code of Civil Procedure section 335.1 applies. Prue's own claim rested on a different public policy, and no case we read applies section 335.1 to a firing over wages in terms. Romano v. Rockwell International, Inc. (1996) 14 Cal.4th 479 held that the clock for a wrongful discharge claim "begins to run at the time of actual termination."

Which period governs your claim is a lawyer's call, and the clock may already be running. Deadlines can run early, so confirm yours with us. Our guide to how long you have to file a wrongful termination claim covers the deadlines in more detail.

Frequently asked questions

Can my employer fire me right before my bonus is paid in California?

If your job was at will, the firing itself may be lawful. The pay is a separate question. A bonus you had already earned by meeting every plan condition is a wage and is due when you are fired. For a bonus not yet earned, your plan's terms decide, and no California appellate decision we found has decided whether a firing timed to stop it breaches the implied covenant.

Do I still get my commission if I get fired?

You do if it was earned. In California a commission is earned when every condition in your plan has been met, and earned wages are due immediately on a firing. If the commission was waiting only on something like the customer's payment, the Labor Commissioner says it must be paid as soon as that happens. A willful failure to pay can add up to 30 days' pay as a penalty.

What happens to my RSUs if I get fired?

Start with your RSU grant agreement, which sets the vesting dates and the rules for a firing with or without cause. We found no California appellate decision on whether RSUs count as wages, and a California appeals court has held that stock options are not wages. Our research also found no California appellate ruling on a firing to stop RSUs vesting. Equity that had already vested and was wrongly cancelled can support a breach of contract claim.

What counts as bad faith in a California firing?

The California Supreme Court has said the implied covenant of good faith might be violated if a firing was a mere pretext to cheat the worker out of a benefit the worker was clearly entitled to, such as pay already earned. That claim is contractual. It does not stop an at-will firing, and it pays contract damages only. The employer's motive generally does not increase them.

Is it wage theft if I was fired and not paid my commission?

The Labor Commissioner uses the term wage theft in plain language for unpaid wages, and an earned commission is a wage. The agency's wage-claim page says: "If you have experienced wage theft you can file an online wage claim with the Labor Commissioner's Office." A commission that was not yet earned is different, because whether it is owed depends on your plan. See our guide to wage theft in California.

Is it hard to prove I was fired to avoid paying me?

It depends on the pay and the timeline. Pay you had already earned is owed either way, so you do not need to prove motive to collect it. For pay not yet earned, the plan's wording, the stated reason for the firing and the timing carry the case. If you had complained about unpaid wages and were fired within 90 days, California law gives you a rebuttable presumption.

How long do I have to sue for an unpaid commission in California?

The period depends on the claim. California's limitation periods include four years for a written contract, three years for a liability created by statute and two years for an oral contract. A wrongful termination claim based on public policy generally has two years from the firing. A lawyer can tell you which clock applies to your facts.

The Law Offices of Jonathan J. Delshad is a Los Angeles based employment law firm representing employees across California in wrongful termination, discrimination, retaliation, harassment, and wage and hour matters. Representing employees is the core of the firm's practice. Mr. Delshad serves as Editor-in-Chief of the California Wrongful Termination Law Review and trained at Latham & Watkins. Recognition includes Super Lawyers (2022 to 2027), Best Lawyers (since 2017), and an Avvo 10.0 "Superb" rating. Reviewed for California employment law accuracy. Last updated: October 7, 2026.

Attorney advertising. This article is educational only and is not legal advice. Reading it does not create an attorney-client relationship, which exists only under a signed engagement agreement. Every case is different, and outcomes depend on the specific facts. Deadlines can run early, so consult a lawyer promptly about your situation.