Signed contracts will be required January 1, 2013
Like so many things, it started with a lawsuit. In the 1990s an out-of-state employer was in trouble for failing to provide California employees with a written contract detailing how commissions were calculated and paid. The ensuing legal battle produced AB 1396 – an amendment to the Labor Code that was passed in 2011 – which goes into effect on January 1, 2013.
If you are an employer (no matter your business location) who has a contract of employment with someone who provides services in the state of California and their pay includes commissions, you must provide a contract that, “…shall be in writing and shall set forth the method by which the commissions shall be computed and paid.”
Additionally, the employer must give a signed copy of the contract to the employee and have, on file, a signed receipt from the employee who received the copy.
AB 1396 contains additional details about some types of commissions that are exempt and other specifics. If you have commissioned employees, now is the time to make friends with AB 1396 (like everything else, you can Google it) and start drafting your contracts.
While SPS does not provide legal advice, we do have resources that can help you create a contract that treads the narrow path of compliance and self-protection. Gives us a call.