A new law for 2013 requires California employers that pay regular commissions to provide employees with a written contract detailing the formula for calculating commissions, as well as the method of payment.
Employers that fail to comply face fines of $100 per employee for first-time violators. Fines escalate to $200 per employee for subsequent violations. The fines will be collected under the Private Attorney General Act (PAGA).
Only regularly paid commissions fall under PAGA’s definition. The law specifically excludes:
- Short-term productivity bonuses, such as those paid to retail clerks
- Temporary incentives that increase commissions
- Bonus or profit-sharing plans, unless they are based on a fixed percentage of sales or profits.