Under New California Law, All Commission Payment Terms Must Be In Writing and Provided to Workers
California's new Labor Code section 2751 requires employers “by January 1, 2013” to provide written contracts to all employees performing services in California whose contemplated method of payment involves commissions.
The new law requires employers to give a signed copy of the contract to every employee to whom the contract applies. In addition, employers must obtain a signed receipt from each employee party to the contract acknowledging their receipt of the contract and its terms.
Contract terms are presumed to remain in effect if no new contract is put in place, and the employee continues working for the employer after the expiration of the contract’s express terms.
Section 2751 incorporates the definition of commissions from Labor Code section 204.1, which defines commission wages as “compensation paid to any person for services rendered in the sale of such employer's property or services and based proportionately upon the amount or value thereof.” “Commission” under Section 2751 does not include:
Short-term productivity bonuses such as are paid to retail clerks; or
Bonus and profit-sharing plans, unless there has been an offer by the employer to pay a fixed percentage of sales or profits as compensation for work to be performed.
Section 2751 does not include any specific penalty provisions for an employer’s failure to comply with it, and, of course, the new law is still untested. Time will tell if it might prove to be a useful tool.
For more information, please contact your labor law counsel.