Whether a part of your pay is commission-based, or whether you are paid entirely based on commissions, as of 2013, California law requires that a written commission agreement be established between commissioned employees and their employers. There are currently no penalties for non-compliance written into the new employment law, but failing to create the required contractual agreement could be considered an unfair business practice under California law.
The new law extends the requirement of putting commission agreements in writing to all employers in California. The stated purpose is to restore employee protections to seek full payment for work completed from employers who have a fixed place of business in California as well as those who do not.
Commissions are, according to California Labor Code 204.1, "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." Commissions that must be in writing will not include productivity bonuses paid to certain workers nor profit-sharing plans, to a certain extent.
The commission contract should specify how commissions are calculated and how they are to be paid to the employee. It should also include:
- How long the commission contract lasts
- What, if any, conditions must be satisfied to earn a commission
- What happens to commissions that are unearned or unpaid when an employee leaves an employer
Each employee must receive a copy of the commission agreement and acknowledge that he or she received it.
Source: Transworld Business, "Put Your Commission Contracts In Writing - It's The Law," Mike Lewis, May 24, 2012