Governor Brown Signs Bill Requiring Employment Contracts for Employees Paid by Commission

By: Sam G. Sherman, Esq.

Last week, Governor Brown signed several pieces of new legislation regarding employment. One such bill amended existing law concerning employers with commissioned salesperson.

Under previous law, an employer with no permanent and fixed place of business in the state that enters into a contract of employment involving commissions as a method of payment with an employee for services to be rendered in California was required to put the contract in writing and set forth the method by which the commissions are required to be computed and paid. The former law made an employer in violation subject to treble damages.

The new law makes two changes. First, it makes the contract requirement applicable to all employers entering into a contract of employment involving commissions. Second, it repeals the treble damages provision.

This is a critical change for employers in California that pay commissions. All such employers must now make sure they have employment contracts with these employees and that the contracts specify the manner of paying commissions. The removal of the treble damages provision leaves little exposure in the event of a violation, but that should not encourage non-compliance.

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