When it comes to how you draft your commission agreements in California, you can’t afford to take any chances -- especially since a new law, A.B. 1396, affects employers’ drafting obligations in a major way.
Commissions can be a great way to boost your sales staff’s entrepreneurial spirit because a commission-based compensation strategy rewards them for their hard work and gives them the incentive needed to help grow your business.
But questions often arise about how the language in commission-based sales agreements should be interpreted -- and the litigation it takes to get those questions answered can be extremely costly for employers. For instance, having a commission agreement that doesn’t specify or fails to adequately define when commissions are earned and what happens upon termination of employment can have disastrous consequences for employers. Plus, even where the agreement’s language is very clear, there are also public policy issues that may limit your ability to restrict or take away commissions.
For these reasons, and a host of others, it's crucial for you to get up-to-date on the new rules so you can make sure you're in compliance.