Key Change: AB 1396 and Written Commission Agreements


All Employers and Commissioned Employees


January 1, 2013


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Starting January 1, 2013, all in-state and out-of-state employers must have written agreements in place for employees who are paid commissions for services provided within the State of California. Information included in these agreements need to provide the method by which the commissions will be computed and paid. With each new employee, the employer must provide a signed copy of the written statement to the employee and obtain a counter-signed “receipt” of the written statement and return it to the employee.

Commissions are defined 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.” Under AB 1396 items not included under “commissions” are: (a) short-term productivity bonuses such as those paid to retail clerks; (b) temporary, variable incentive payments that increase, but do not decrease, payment under the written contract, and (c) bonus and profit-sharing plans, unless there has been an offer by the employer to pay a fixed percentage of sales or profits as compensation for work to be performed.


Action Items:

  1. Obtain a written agreement, signed by the commissioned employee.
  2. Set forth the method by which the commissions shall be computed and paid.
  3. Give the employee a signed copy.
  4. Obtain a signed “receipt” of the written agreement.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.

© 2012 ManagEase, Incorporated.

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