California’s New Pay Plan Law

California’s New Pay Plan Law

John P. Boggs, Esq.

Fine, Boggs & Perkins LLP

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Speakers

Moderator Presenter

Becky RossMarketing Manager

303-228-8753

bross@kpaonline.com

John P. Boggs, Esq.Fine, Boggs & Perkins LLP

415-378-3150jboggs@employerlawyers.com

Questions

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California Labor Code Sec. 2751

Requires that all California employers that pay employees on a commission basis must provide those employees with a written agreement or pay plan meeting specific requirements.

Dealers need to develop a system to regulate how pay plans are drafted, determine who has authority to distribute them, and a system to ensure compliance with the signature and “receipt” requirements.

Employment LawsCOMMISSION PAY PLANS

Specific Requirements:

Pay plan must include an explanation of the “method” to compute and pay commissions.

Signed copy of pay plan must be given to the employee.

Employer must receive a signed receipt from employee acknowledging receipt of the pay plan.

If the agreement or pay plan expires, and the parties continue to work under those terms, the terms are in full force and effect until a new contract or pay plan is signed.

Employment LawsCOMMISSION PAY PLANS

Exceptions:

Short-term productivity bonuses Temporary, variable incentive payments that increase payment

under the agreement Bonus & Profit Sharing plans, unless an offer has been made to pay

the employee a fixed % of sales or profits as compensation

Key: Nevertheless, all recurring bonus or spiff programs should be in writing.

Also, it is a good idea to identify commission “kickers” as temporary, variable commission compensation (e.g., % increase in commissions for changing C.S.I., unit volume commissions increases that dealer changes month to month, etc.).

Employment LawsCOMMISSION PAY PLANS

What You Must Do:

Ensure that all employment agreements that include payment by commission be put into writing.

Ensure that the agreement includes a specific breakdown of how the commissions are to be calculated and paid. Provide a signed copy of the contract to the employee.

Receive a signed receipt for the contract from the employee. This can be incorporated into the written pay plan itself.

Employment LawsCOMMISSION PAY PLANS

IMPACT

ACCOUNTABILITY! This new law poses a HUGE compliance challenge. Dealers must set up a process of “accountability” and “checklists” for the development and issuance of any commission pay plans.

No more “cocktail napkin” pay plan.

This requirement applies even to those employees who are paid hourly or a salary but who also receive a commission as part of their pay plan.

Employment LawsCOMMISSION PAY PLANS

Sample Language

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WAGE STATEMENT REQUIREMENTS

Must provide employee with an itemized wage statement containing: Gross or net wages Total hours worked (except for salaried employees) For piece-rate/flat-rate workers, the number of pieces earned and any applicable piece rate Inclusive dates of the pay period

Employment Laws

Employment Laws

WAGE STATEMENT REQUIREMENTS (cont.)

Inclusive dates of the pay period

All applicable hourly rates in effect and the corresponding number of hours worked at each hourly rate

Deductions from wages made

Legal name and address of employer

Name and address of employee with last four digits of SSN# or employee I.D.

Popular Wage & Hour Lawsuits and Issues

Flat rate per unit (Gonzales v. Downtown LA Motors)

CarMax Case – what are commissions? Flat amount ok?

Hybrid where commissions not exceed other comp.

Service Advisors - selling, not just warranty or order-takers

Employment Laws

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