California employees receiving commissions have a right to know how their commissions will be calculated and paid.
Effective January 1, 2013, employers who pay employees by commission are required to memorialize the commission arrangement in a written contract that includes: the method for calculating the commissions, a description of when the commissions will be deemed earned and how they will be paid and requires the employee to sign a “receipt” retained by the employer. California Labor Code § 2751.
Labor Code § 204.1 defines commissions as “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.”
Even though there is no corresponding penalty provision for violation of Labor Code § 2751, employees still have the option to file a claim for penalties under the Private Attorneys General Act of 2004 (Labor Code §§ 2698, et seq.) for violation of this law.
Not all commissions and bonus plans must comply with this new law but consult with an attorney at Aegis Law Firm, PC to determine whether the commission structure and/or bonus plan you are subject to implicate Labor Code § 2751.