Employers with sales teams in California need to get ready. California has a new commission contract law, AB 1396, which takes effect January 1, 2013. Under AB 1396, which amends California Labor Code section 2751, employers who pay commissions to their employees are required to enter into written commission contracts with employees. The contract must describe the method by which commissions are computed and paid. Employers must also provide a copy of the signed contract to each employee, and get a signed receipt from each employee. That’s the easy part. Here’s the tricky part. Going forward, when a contract governing commissions expires without being replaced but the employee continues work, the terms of the “expired” contract will apply to commissions until the parties sign a new agreement or until the employment is terminated. As a result, it will be important to get new commission contracts in place before or when the old ones expire.
