BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 1370|
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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:
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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)
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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
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