BILL ANALYSIS Ó
AB 1396
Page 1
ASSEMBLY THIRD READING
AB 1396 (Labor and Employment Committee)
As Amended May 26, 2011
Majority vote
LABOR & EMPLOYMENT 5-1
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|Ayes:|Swanson, Alejo, Allen, | | |
| |Furutani, Yamada | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Morrell | | |
| | | | |
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SUMMARY : Requires that all employers provide a written contract
to employees who are paid commission. Specifically, this bill :
1)Declares legislative intent of the bill, in light of the
specified court decision, to restore the employee protections
that had been in effect by making Labor Code Sections 2751 and
2752 apply equally to employers with a fixed place of business
in the state and to employers who do not have a fixed place of
business in the state.
2)Requires all employers, by January 1, 2013, to provide a
written contract, with specified details, to employees who are
paid commission.
3)Adds when a contract expires and where the parties continue to
work under the terms of the expired contract, the contract
terms are presumed to remain in full force and effect until
the contract is superseded or employment is terminated by
either party.
4)Deletes the provision of law which states that an employer
shall be liable to the employee in a civil action for treble
damages when an employer does not provide a written commission
contract, as specified.
EXISTING LAW :
1)Requires employers with no permanent and fixed place of
business in California to provide written contracts to
employees, when the method of payment involves commission,
AB 1396
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which specifies the way in which the commissions will be
calculated and paid.
FISCAL EFFECT : Unknown
COMMENTS : According to the sponsor of this bill, the
Conference of California Bar Associations, in their letter they
state, this measure is intended to restore to Californians
employed by out-of-state companies on a commission basis the
protections provided by Labor Code Section 2751, which requires
such commission agreements to be in writing. Labor Code Section
2751 was declared unconstitutional by the Federal District
Court, Northern District, in Lett v. Paymentech, Inc. (N.D. Cal.
1999) 81 F.Supp.2d 992, which held that this section violates
the Commerce Clause and Equal Protection Clause of the United
States Constitution because of its discriminatory treatment of
out-of-state employers and their in-state counterparts.
Although the statute remains on the books it is unenforceable,
the protections it is to provide are not there making it a trap
for the unwary employee.
The sponsor asserts, this bill resolves the constitutionality
issue by removing the distinction between out-of-state and
in-state companies making all subject to the requirement that
all commission contracts be in writing. This is consistent with
the approach taken by several other states (e.g., Georgia,
Louisiana, Maryland and Tennessee) to address constitutional
issues with their own similar statutes. They also state, the
written contract requirement is not only consistent with best
business practices, but serves to protect both employees and
employers as well, by providing certainty as to agreements
entered into and thereby forestalling unnecessary litigation.
Finally, the sponsor states this bill includes amendments that
were made to the original version of SB 1370 (Ducheny) of 2010
at the request of the opposition to add clarity and certainty.
It clearly defines what constitutes a commission contract,
consistent with the California Supreme Court's holding in
Ramirez v. Yosemite Water Co., Inc. (1999) 20 Cal.4th 785. It
specifies that an employer is not in violation of the statute
merely because a written commission agreement has expired, as
long as the parties continue to operate in accordance with the
agreement. And it gives California-based employers who do not
already put commission contracts in writing one full year (as
most already do), until January 1, 2013, to comply with this
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bill's requirements.
Arguments in support : The California Employment Lawyers
Association supports this bill stating that by clarifying that
all commission contracts must be in writing, the rights and
earnings of all California employees are protected. Written
contracts avoid disputes between employers and employees
regarding compensation, and prevent costly and time-consuming
court cases. In addition to removing unconstitutional
provisions in the statutes, this bill will help to assure that
California employees and their employers avoid compensation
disputes.
Arguments in opposition : The opposition to this measure, the
California Employment Law Council, argues this legislation
imposes a requirement of a written contract on all commission
agreements in this state and there is no justification for
extending it to every business in California.
The California Chamber of Commerce and the Civil Justice
Association of California have stated they are now neutral with
the deletion of the treble damages provisions.
Prior legislation : SB 1370 Ducheny of 2010 would have extended
the conditions necessitating a written contract of employment to
all employers in the State of California. This bill was vetoed
by Governor Schwarzenegger.
AB 836 (Frew), Statutes of 1963, Chapter 1088, required 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.
Analysis Prepared by : Lorie Erickson / L. & E. / (916)
319-2091
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