California law defines commission wages 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."

This new law, however, explicitly states that commissions do not include: (1) profit-sharing plans, unless the amounts are a fixed percentage of sales, or profits, as compensation for work to be performed or (2) temporary short-term productivity bonuses, where employers might briefly provide an increased commission or bonus during a specific period.

Employers with California employees paid on commission would be wise to seek the advice of counsel before presenting an employee with a written commission plan or agreement. Although commission plans do not have to be complicated, they should be carefully worded and at the very least must accurately describe how the commission is calculated, when the commission is earned, and when the commission will be paid. If the employer is contemplating the need for charge backs against a commission, that too must be accurately set forth and described, and such employers must be mindful of the state and federal laws against forfeiture.