Sales Performance Management Best Practices Blog

Signed Sales Compensation Plan Documents are now the law in CA AB1396

Posted by Jerry Hegarty on Thu, Dec 20, 2012 @ 09:12 AM


Contracts signed by both parties, the sales rep and the business, are now required by the State of California. NetCommissions provides you with a comprehensive solution to this challenge.

On New Year ’s Day, Jan. 1, 2013, The Bill AB1396 sponsored by the Assembly Committee On Labor And Employment of the State of Californian legislature becomes effective.

This law basically stipulates that all companies who employ Sales Reps (anyone pSales Compensation Plan Documentsaid commissions) in the State of California will be obligated to provide them with a Plan Document (contract) that details the methods used in computing and paying their sales commissions. This law applies to all companies that have sales reps on commission plans in California, irrespective of whether the company is domiciled in California or not.

Interestingly, this bill requires both parties to be furnished with a signed contract (plan doc) that includes not only the signature of the sales rep, but the corporation as well.

The language of the law focuses only Sales Commissions and Sales Incentive payouts.

Sales Performance Management solutions like NetCommissions provide businesses with an automated option for Sales Commission Plan documentation, circulation and approval.

NetCommissions Sales Performance Management

Here is the Bill in its enitrety

Assembly Bill No. 1396

An act to amend Section 2751 of, and to repeal Section 2752 of, the Labor Code, relating to employment.

[ Approved by Governor  October 07, 2011. Filed Secretary of State  October 07, 2011. ]


AB 1396, Committee on Labor and Employment. Employment contract requirements.

Existing statutory law, which has been held invalid by existing case law, requires an employer who has no permanent and fixed place of business in the state and who enters into a contract of employment involving commissions as a method of payment with an employee for services to be rendered within the state to put the contract in writing and to set forth the method by which the commissions are required to be computed and paid. An employer who does not comply with those requirements is liable to the employee in a civil action for triple damages.
This bill would, by January 1, 2013, make this contract requirement applicable to all employers entering into a contract of employment involving commissions as a method of payment with an employee for services to be rendered in the state. In addition, the bill would repeal the provision making an employer who violates this requirement liable in a civil action for triple damages.


Vote: majority   Appropriation: no   Fiscal Committee: no   Local Program: no  




The Legislature hereby finds and declares that this bill is enacted in light of the holding in Lett v. Paymentech, Inc. (N.D.Cal. 1999) 81 F.Supp.2d 992 and that the intent of this bill is to restore the employee protections that had been in effect prior to that holding by making Section 2751 of the Labor Code apply with equal force to employers with a fixed place of business in the state and to employers who do not have a fixed place of business in the state.

SEC. 2.

 Section 2751 of the Labor Code is amended to read:


(a) By January 1, 2013, whenever an employer enters into a contract of employment with an employee for services to be rendered within this state and the contemplated method of payment of the employee involves commissions, the contract shall be in writing and shall set forth the method by which the commissions shall be computed and paid.
(b) The employer shall give a signed copy of the contract to every employee who is a party thereto and shall obtain a signed receipt for the contract from each employee. In the case of a contract that expires and where the parties nevertheless continue to work under the terms of the expired contract, the contract terms are presumed to remain in full force and effect until the contract is superseded or employment is terminated by either party.
(c) As used in this section, “commissions” has the meaning set forth in Section 204.1. “Commissions” does not include short-term productivity bonuses such as are paid to retail clerks; and it does not include 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.


SEC. 3.

 Section 2752 of the Labor Code is repealed.

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