BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 1370| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: SB 1370 Author: Ducheny (D) Amended: As introduced Vote: 21 SENATE LABOR & INDUST. RELATIONS COMMITTEE : 4-0, 5/3/10 AYES: DeSaulnier, Ducheny, Leno, Yee NO VOTE RECORDED: Wyland, Hollingsworth SUBJECT : Employment contract requirements SOURCE : Conference of California Bar Associations DIGEST : This bill requires that employees who are paid by commission are provided with a written contract on the terms and conditions of employment. ANALYSIS : Existing law and case law defines a commission as compensation paid to any person for services rendered in the sale of such employer's property or services and based proportionately upon the amount or value thereof. Existing law defines a contract of employment as a contract by which one an employer engages an employee to do something for the benefit of the employer or a third person. Existing law requires a written contract of employment if the following conditions are met: CONTINUED SB 1370 Page 2 1. The employer has no permanent and fixed place of business in California. 2. The employer in entering into a contract of employment with an employee for services to be rendered within California. 3. The contemplated method of payment of the employee involves commissions, unless excluded. Under these conditions, the contract must be in writing and must set forth the method by which the commissions shall be computed and paid. The commissions excluded are: 1. Short-term productivity bonuses such as are paid to retail clerks. 2. Or, 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. Existing law holds any employer who fails to contract with an employee as required to be liable to the employee in a civil action for triple damages. This bill extends the conditions necessitating a written contract of employment to all employers in the State of California. Prior Legislation AB 836 (Frew), Chapter 1088, Statutes of 1963, requires that out-of-state employers provide a written contract under the conditions discussed above, as well as creates a penalty for failing to provide such a written contract. FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local: No SUPPORT : (Verified 5/3/10) Conference of California Bar Associations (source) SB 1370 Page 3 California Employment Lawyers Association California Labor Federation California State Pipe Trades Council Consumer Attorneys of California State Association of Electrical Workers Western State Council of Sheet Metal Workers ARGUMENTS IN SUPPORT : Proponents argue that requiring written contracts in the specific instance of commission-based compensation employment provides clarity and protection to both the employer and the employee. By prohibiting oral contracts and requiring that a commission-based work contract be clearly written, the proponents believe that this bill lessens the probability of unnecessary litigation, as well as ensures that the existing law, which is completely unenforceable, does not provide a "trap for the unwary" and cast the illusion of protection, rather than actually provide it. PQ:mw 5/4/10 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****