Does Your Business Pay Commissions To Employees In California? Get Ready To Put It In Writing!

by Sayema Hameed

Employers who pay commissions to employees in California must comply with the new California law, AB 1396.  Recently signed into law by Governor Jerry Brown, AB 1396 amends California Labor Code Section 2751 to require all employers who pay commissions to employees to enter into written commission contracts with those employees.  Employers must comply with this law by January 1, 2013.

The written commission contract must explain the method by which commissions are computed and paid.    In addition, employers must also give a copy of the signed contract to each employee and obtain a signed receipt for the contract from each employee.