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Your Legal Corner - Client Alert Blog

Written Employment Contracts Required For California Employees Paid Commissions

Written By: Melissa C. Marsh, Esq., California Attorney, October 2012 Add to Favorites
Effective January 1, 2012, California Labor Code sections 2751 and 2752 require all employers (in-state and out-of-state) who pay their California employees a commission to provide said employees with a written employment contract or plan that specifies the method by which the commissions will be computed and paid. Employees must acknowledge that they received the contract and/or plan.

California law 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."

This new law, however, explicitly states that commissions do not include: (1) profit-sharing plans, unless the amounts are a fixed percentage of sales, or profits, as compensation for work to be performed or (2) temporary short-term productivity bonuses, where employers might briefly provide an increased commission or bonus during a specific period.

Employers with California employees paid on commission would be wise to seek the advice of counsel before presenting an employee with a written commission plan or agreement. Although commission plans do not have to be complicated, they should be carefully worded and at the very least must accurately describe how the commission is calculated, when the commission is earned, and when the commission will be paid. If the employer is contemplating the need for charge backs against a commission, that too must be accurately set forth and described, and such employers must be mindful of the state and federal laws against forfeiture.

Tags: written commision agreements required
Posted In: Employment Law News 

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Located in Los Angeles, California, the Law Office of Melissa C. Marsh handles business law and corporation law matters as a lawyer for clients throughout Los Angeles including Burbank, Sherman Oaks, Studio City, Valley Village, North Hollywood, Woodland Hills, Hollywood, West LA as well as Riverside County, San Fernando, Ventura County, and Santa Clarita. Attorney Melissa C. Marsh has considerable experience handling business matters both nationally and internationally. We routinely assist our clients with incorporation, forming a California corporation, forming a California llc, partnership, annual minutes, shareholder meetings, director meetings, getting a taxpayer ID number (EIN), buying a business, selling a business, commercial lease review, employee disputes, independent contractors, construction, and personal matters such as preparing a will, living trust, power of attorney, health care directive, and more.