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Am I required to have a written agreement or employment contract with employees paid on commission?

California Labor Code Section 2751 requires employers to provide commission agreements in writing specifying the method by which commissions are both computed and paid.

The agreement must be signed by both the employer and the employee, and the employees must receive a copy of the signed agreement. If the agreement expires and the employee continues working for the employer, the terms of the expired contract are presumed to remain in effect until a new agreement is in place. Be sure to specify that any new agreement supersedes prior agreements.

The agreement should clearly specify how the commission is earned, including whether it is earned at a single point or as specific events occur, and what happens if the employee leaves before all conditions to earn the commission are met.

Employers also should consult with legal counsel on how commissions may (or may not) be affected when an employee is on a protected leave of absence, such as pregnancy disability leave or family medical leave.

Read about Commissions in the HR Library.

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