Commission Plan: Is it In Writing and Signed by Both You and Your Employer?

If you work in a commission-based job, every role you have as part of the sale makes a difference. Sometimes commission-based jobs are simple – you earn a certain percentage for each sale you have converted. But there are times when payment plans aren’t quite so clear. That’s why a written commission plan, understood and signed by both the employer and the employee, are required in California.  

When a commission-based employee understands his or her role, it can make the job easier for everyone. Sadly, standards and protocols are not always set in writing, creating confusion. Carter Law Firm, an Orange County employment law firm, wants you to have concrete knowledge of what your commission plan is, and if your employer is in compliance with applicable laws.    

Commission Plans in California 

A commission is defined by Labor Code section 2751 as “compensation for the sale of property or services that is proportional to the amount or value of the property or services sold.” A commission plan is a written contract between an employee and the employer, typically covering the base salary, and how much commission the employee will receive based on specific components.  According to Labor Code section 2751, “California employees paid by commission must be provided a signed written contract stating how the commissions will be calculated and paid.” It is also suggested that both the employee and employer need to sign the plan and that the employer must provide a copy of the plan to the employee. 

Why is this Important? 

Unfortunately, not all employers follow the law.  Often the plan is never even committed to writing, creating a clear violation.  Other times, employees outlast the term of an initial plan, and a second plan or renewal plan is never drafted.  In either of these scenarios, the employer is not in compliance with applicable California labor laws.   

In a recent example, Bloomingdale’s did not have a properly structured written commission plan in place regarding its newly hired sales employees.  As a result, the employees went on strike, claiming they were not making enough off of commissions alone. The reality was Bloomingdale’s had failed to provide a clear written plan at inception, thereby creating the payment issues.  Bloomingdale’s, as well as all other employers who hire commission-based employees, can avoid such labor strife if they utilize clearly written and understood commission plans, signed by both the employer and the employees, at the inception of employment.    

If you are a commission-based employee in California and have not been provided a signed written commission plan by your employer, you have the right to take legal action. Carter Law Firm can help.  If you’d like to provide us with some confidential information about your case, contact us here, or fill out the contact form below.