Reminder: New Law Takes Effect Regarding Commissioned Employees


Employers of all sizes and types with employees who perform work in California may want to take heed of this reminder. Our December 6, 2011, Alert advised of several new employment laws enacted that year. If any workers are paid on commission, one of those new laws has just taken effect, requiring employers to take action. Under the new law, which took effect on January 1, 2013, employers are required to put commission arrangements in writing, formalizing the arrangement through a written contract. The method of computing and paying the commissions is expressly required. The law also requires employers to provide the worker with a signed copy and obtain an acknowledgment of receipt. Expired contracts are presumed to continue. A similar law is also in effect in New York.

Although the statute does not set forth specific penalties, an employer risks allegedly unpaid or late commissions; penalties under California's Private Attorney General Act (PAGA); damages under California's Unfair Competition Law (UCL); and any associated attorneys' fees.

What This Means for Employers

Companies of all sizes and types may want to promptly evaluate whether any of their work is performed in California. Retail and manufacturing companies and those in sales are especially vulnerable. All companies should consider evaluating their workforce and determining whether any workers are paid, even in part, on commission, or what the worker may construe as commission. It may also be prudent to determine if the appropriate commission contracts are in place and have been provided to the workers, as well as whether appropriate acknowledgements of receipt have been obtained. If companies have not taken each of these steps, the time to act is now. The new law provides an excellent opportunity to evaluate whether commission programs are working well and to resolve recurring calculation or payment issues.

For Further Information

If you have any questions about this Alert or would like more information, please contact any member of the Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.

Topics:  Compensation & Benefits, Employment Contract, Sales Commissions

Published In: Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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