New CA Law Requires Written Commission Agreement

Governor Brown has mercifully vetoed many of the loony ill-conceived employment law bills that the legislature passed this term. But he signed AB 1396, which is going to impose a serious burden on employers who pay employees via commission.

The new law requires employers who pay employees via commission to (1) have a written contract with the employee regarding commissions (2) include the method for calculating the commissions (3) require the employee to sign a "receipt" retained by the employer. 

Also, the contract remains in effect until a new commission plan has superseded it or employment terminates, even if the old plan expires.

Finally, the law attempts to define commission and excludes bonuses, but then includes bonuses that are a percentage of sales or profits. Now, commissions aren't percentages of profits. So, some bonuses will be included in this provision.

I predict a lot of work for SV drafting commission plans in 2012.

The law takes effect 1/1/13. The text is here.