PASADENA, CA -- The National Automatic Merchandising Association has sent a bulletin to members in California to explain new reporting rules mandated by California's Labor Code 2571. These rules took effect on Jan. 1.
The new code requires employers doing business in California to prepare a written agreement when a commission is a component of an employees' compensation. Under the law, the contracts must explain the method used to calculate the commission and the manner in which it's paid.
Deborah Lara, manager of NAMA’s Western Office here, noted, "It is important for an employer to be as detailed as possible, while still maintaining some flexibility."
The new law requires an employer to specify all components of the commission (i.e., any costs or adjusted amounts in determining the final amount). "Remember, a commission is due and payable after the terms and conditions have been reasonably met," Lara underscored. "Thus, care needs to be taken when drafting when the employee can expect payment."
Operators must provide signed copies of contracts to every employee covered by their commission agreements or plans, and they must also receive and retain signed receipts from the employees acknowledging receipt and agreement to commission agreements. This means vending operators must also sign the documents.
Lara explained that there are penalties for failure to comply with the new rules. In addition to the usual wage and hour penalties (and litigation that may ensue for not paying employees correctly or in a timely manner), a violation of the law will result in a statutory penalty of $100 for each aggrieved employee per pay period, for the initial violation, and $200 for each aggrieved employee per pay period for each subsequent violation.
Practical steps to compliance will include, first, determining whether the compensation method in question actually is a "commission" (a specified percentage of sales or profits) and not a bonus or profit-sharing system; then explaining what the commission is and how it will be calculated, including any deductions such as sales taxes; next, explaining how and when the commission actually is earned; and finally, explaining the manner in which the commission will be paid, so the employee will know when to expect payment.
The NAMA manager added that the association's labor law Knowledge Source Partner, Heather A. Bailey, offers members one free 15-minute consultation per quarter. A partner in SmithAmundsen LLC, Bailey focuses on labor and employment law issues from the management side. She has been a Knowledge Source Partner for more than nine years, and can be contacted at (312) 894-3266 or firstname.lastname@example.org.
Lara also suggested that members sign up for the SmithAmundsen blog, which provides up-to-date labor and employment news at no charge. It's available at laborandemploymentlawupdate.com.