Does a commission plan have to be in writing in California?

Commission disputes are among the hardest wage claims to defend, not because the law is complicated but because the terms are usually remembered rather than recorded — and two people remember a commission structure differently the moment a deal is large.

The section requires a written contract whenever commissions form a method of payment for services. It must state the method by which the commission is computed and the method by which it is paid, both parties must sign, and the employer has to give the employee a signed copy and keep a signed receipt.

The definition is narrower than "any variable pay". Short-term productivity bonuses, and profit-sharing plans that are not a percentage of the employer's sales or profits, sit outside it. Commissions proper — compensation based on a percentage of the price of goods or services the employee is involved in selling — are inside.

The consequence of having nothing in writing is not a fine so much as a burden. Where the terms are undocumented, the dispute becomes a question of whose account is more credible, and the party who was required by statute to write it down is not usually the one that question favours.