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Is splitting credit card commission fees legal?

Summary

If the deduction of the credit card fees was mentioned in a commission agreement you signed, your company may be allowed to take it. Otherwise, it may be breaking the rules. Learn when and how to take action.

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Dear Your Business Credit,

I am on a sales commission split of 60/40 gross profit with my company. Normally, credit card fees of 3 percent for customer payments are split with my company. Is this legal in state of California? – Pete

Dear Pete,

This is a tricky question. It depends on the circumstances. If the deduction of the credit card fees was mentioned in a commission agreement you signed, your company may be allowed to take it. Otherwise, it may be breaking the rules.

Check out all the answers from our credit card experts.

Ask Elaine a question.

See related: My club instated a card-only payment policy, including processing fees; is it legal?

A fine line

I ran your question past the Department of Industrial Relations in California to get as much clarity on this as possible.

As a spokesperson for the department told me in an email, “Credit card fees are just one of the expenses that employers need to deduct before determining profit and calculating commission. Although there is no regulation prohibiting the practice of deducting credit card fees from the sales transaction, per California Labor Code § 2751, commission agreements must be in writing, and it’s advisable that employees on commission insist that the agreement in writing enumerate the costs charged against profit.”

What happens if the credit card fees were not mentioned in a written commission agreement?

“If an employee is seeing deductions which are not stated in the commission agreement, they should file a wage claim, as this could be considered wage theft,” the spokesperson wrote. “However, where the commission is based on the ‘gross profit,’ the employer may deduct the fee as an expense.”

It’s probably hard to remember the details of the paperwork you signed when you took your job, so when in doubt, review that agreement. Or if you’ve lost the document, request a copy from your employer.

There could be a clause that allows your employer to deduct the fees. It’s easy to miss details like this when you’re filling out reams of paperwork in the onboarding process at a new job.

Next steps

If you do feel you’ve been a victim of wage theft, you may want to check out the California’s Labor Commissioner’s Office website on how to file a wage claim. You’ll find more detailed information on how to file a claim by email, mail, or in person.

Of course, you’ll want to consider all the implications of filing a wage claim against your employer before you take any action.

If you think your employer has made an honest mistake in deducting the credit card fees from your pay, speak up. A responsible employer won’t want to violate state regulations. The employer may offer a way to rectify the situation immediately, such as ending the deduction right away and refunding the past fees deducted from your paycheck.

If your employer seems to be breaking the rules intentionally, escalating the matter to the state could make sense. Only you can decide the best course of action in the situation.

Going forward, make sure you review every line of any new commission agreement you sign at future jobs. Some of the deductions may be negotiable with your employer. As you’ve discovered, any charges against your commissions can add up over time.

What’s up next?

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Published: July 25, 2019

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