New Commission Requirements Effective January 1, 2013

Beginning January 1, 2013, a new law requires employers that have any employees who receive commissions for providing services in California to have written commission agreements that meet specific requirements. The following requirements will apply whenever an employer enters into an employment contract with an employee for services and the contemplated method of payment of the employee involves a commission:

1. The contract must be in writing
2. The contract must set forth the method by which the commissions will be computed and paid. You can state a percentage or refer to a commission schedule.
3. The employer must provide the employee with a signed copy of the contract.
4. The employer must obtain a signed receipt for the contract from the employee, acknowledging both receipt of the contract and the commission arrangement.

In addition, if the contract expires but the employee continues to work under its terms, the terms will be presumed to remain in full force and effect until the contract is superseded by a new contract between the parties or either party terminates the employment.

Note: Commission wages do not include short-term productivity bonuses.