CALIFORNIA LABOR CODE § 2751 REQUIRES A WRITTEN AGREEMENT WHEN EMPLOYEE COMPENSATION INVOLVES PAYMENT OF COMMISSIONS

June 12, 2013

New California law requires written commission agreements** for employees
effective Jan. 1, 2013. California law requires employers to provide a written agreement to all employees who perform work in California and are paid on a commission basis.

California Labor Code Section 2751 requires that the agreement:

(1) Be in writing;
(2) Set forth how commissions will be computed and paid; and
(3) Be signed by the employer.

The new law further requires the employer to provide a copy of the agreement to each employee, and obtain a signed receipt for the agreement from each employee. In addition, if the employee continues to provide work after the written agreement expires, the terms are presumed to remain in full force and effect until superseded by a new agreement or employment is terminated by either the employer or employee.

How the new law affects employment in California
(1) Employees who provide “services” within California and who are paid on a commission basis are covered by the law, regardless of whether the employee is “based” in California.
(2) The law applies to out-of-state companies, regardless of whether the company has a physical facility or office in California if its employee is providing services within California.
(3) A written agreement is required if the employee’s wages are calculated and paid either entirely or partially on a commission basis.

**The term “Written Agreement” or “Agreement” as used herein has the same meaning as “Written Contract” or “Contract.”

Note: This alert is designed to provide a summary of general information. It does not attempt to offer solutions to individual problems. Kenneth J. Sargoy, Esq., provides assistance and representation in connection with employment matters. Questions about this new law, drafting or revising present commission agreements to conform to the new law as well as other employment matters should be directed to Kenneth J. Sargoy, Esq., telephone 310-208-1003 or or his email, [email protected] THIS EMPLOYMENT ALERT CONSTITUTES ADVERTISING UNDER APPLICABLE RULES OF PROFESSIONAL CONDUCT.